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1. Which of the following statement is correct? a. When the degree of risk associated with future cash flows goes down, the stock price also goes down. b. In a limited partnership, the general partners usually participate actively in the management of the business, whereas limited partners usually do not. c. When firms spend time and money to monitor and reduce agency problems, we call these outlays of time and money as principal benefits. d. All the answers are incorrect. e. A business owned by one person is called a corporation.
2. Which of the following statements is CORRECT? a. Real-risk-free rate of interest would exist on default-free U.S. Treasury securities if no inflation were expected. b. Inflation premium equal to expected inflation that investors subtract from the real risk-free rate of return c. The reinvestment rate risk is the risk that a decline in interest rates risk will lead to higher income when bonds mature and funds are reinvested. d. Term structure of interest rates is the relationship between bond and stock yields.
Beatrice Markets is expecting a period of intense growth and has decided to retain more of its earnings to help finance that growth. As a result, it is going to reduce its annual dividend by 30 percent a year for the next 2 years. After that, it will..
what price do you need if you expect to sell the share immediately after it pays the? dividend?
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $132,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $587,000 p..
calculate the required monthly payments to pay off the loan.
Equity can be viewed as a call option and debt holders can be viewed as the owner of the firm who writes a call option. In addition, debt can be viewed as a portfolio of risk free debt and a short position in a put option. Provide a brief discussion ..
The shipping charges are $150 and the interest is 8.75% for both options. What is the exact interest on both offers?
Float Simon Corporation has daily cash receipts of $64,000. A recent analysis of its collections indicated that customers’ payments were in the mail an average of 3 days. Once received, the payments are processed in 2.5 days. After payments are depos..
Calculate the cost of Matt's condo during the first year if he currently has the $5,000 down payment invested in an account earning 5% interest.
Farmers and businessmen in Bulgaria (EU) can lease equipment and pay for it over time instead of raising money up front to buy it,
Suppose an investor purchases a 10-year inflation protected Treasury security in 2005 for $10,000. How much will the investor collect in 2015 when the bond matures? Suppose an investor purchases $100 of face value of an inflation protected Treasury s..
The risk-free rate of return is 8%, the expected return of the market portfolio is 15%, and the stock of Xyrong Corporation has a beta coefficient of 1.2. Xyrong pays out 40% of its earnings in dividends and the latest earnings announced were $10 per..
Chamberlain Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 7 percent coupon bonds on the market that sell for $1,083, make semiannual payments, and mature in 20 years. What coupon rate should t..
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