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Consider two local banks. Bank A has 75 loans outstanding, each for $ 1.0 million, that it expects will be repaid today. Each loan has a 3 % probability of default, in which case the bank is not repaid anything. The chance of default is independent across all the loans. Bank B has only one loan of $ 75 million outstanding, which it also expects will be repaid today. It also has a 3 % probability of not being repaid. Which bank faces less risk Why ?(Select the best choice below.)
A. The expected payoffs are the same, but Bank A is riskier. I prefer Bank B.
B. In both cases the expected loan payoff is the same: $75 million×0.97=$72.8 million. Consequently, I don't care which bank I own.
C. The expected payoffs are the same, but Bank A is less risky. I prefer Bank A.
D. The expected payoff is higher for Bank A, but is riskier. I prefer Bank B.
Suppose that the Fed were less in de pen dent. How could this affect monetary policy? - Suppose that the Fed were more in de pen dent. How could this affect monetary policy?
Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 10.25%; rRF = 6.75%; rM = 8%. Round your answer to two decimal places.
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Pierce Furnishings generated $2 million in sales during 2012, and its year-end total assets were $1.3 million. Also, at year-end 2012, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,..
Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return Aggressive Stock Defensive Stock 6% 2.8% 4.6% 15 28 10. What are the betas of the two stocks?
Blushing Rose invests $1,000 into her Roth IRA. She can increase this investment annually by $1,000 until she reaches the $5,000 annual contribution limit. She will then invest $5,000 per year at the beginning of each year for 30 years. How much will..
The NOI is $1,000,000, the debt service is $800,000 of which $700,000 is interest, the depreciation expense is $250,000. What is the after-tax cash flow to the equity investor if the income tax rate is 33%? A property is sold for $5,100,000 with sell..
Consider four different stocks, all of which have a required return of 15 percent and a most recent dividend of $4.80 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, ..
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What factors can positively influence an organization’s shareholder wealth? Which of these factors are the most significant? Explain your choice.
Florida Power and Light has committed to building a solar power plant. JoAnne, an IE working for FPL, has been tasked with evaluating the three current designs. FPL uses an interest rate of 10% and a 20-year horizon. A field of “flat solar panels ang..
Janicek Corp. is experiencing rapid growth. Dividends are expected to grow at 26 percent per year during the next three years, 16 percent over the following year, and then 8 percent per year indefinitely. The required return on this stock is 15 perce..
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