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Today you buy a used car. The dealer accepts a down payment of $2,000 and lets you pay $1,900 per year for 5 years. The interest rate on the loan was 6%. How much was the car?
These two possibilities are equally like. If you wait, the true outcome will be appraent in period 1, at the expense of a one period delay for all cash-flows. What is the value of the option to dela
Smeagal Industries is considering a new division, making pixie dust in a handy resealable pouch. THey intend to finance it with 60% equity, and 40 risk-free debt. They have identified the following
Calculate both the direct expense of issuance and the indirect (i.e., underpricing) expense. What percentage of the market value of the shares is represented by these costs?
A machine can be purchased for $10,500, including transportation charges, but installation costs will require $1,500 more. The machine is expected to last four years and produce annual cash revenues
what do you think the stock price will range with a 95% probability over the next two months? what about the continously compounded rate of change in the stock price?
Discuss the lower bound for option prices and the put-call parity with and without dividend yields; and explain why.
if the required return declines to 9% and the dividend remains $1, what is the value of the stock? if the stock is selling foor $20, what does that imply?
Southern Home Cookin' just paid its annual dividend of $.80 a share. The stock has a market price of $26 and a beta of 1.1. The return on the U.S. Treasury bill is 4 percent and the market risk prem
An investment is available that pays a tax-free 5%. The corporate tax rate is 25%. Ignoring risk, what is the pre-tax return on taxable bonds?
Assume that the real risk-free rate is r* = 2% for all maturities and that there are no maturity premiums. If 3-year Treasury notes yield 2 percentage points more than 1-year notes, what inflation r
The real risk-free rate is 4%. Inflation is expected to be 3% this year, 5% next year, and then 5% thereafter. The maturity risk premium is estimated to be 0.0003 x (t - 1), where t = number of year
You just purchased a bond that matures in 4 years. The bond has a face value of $1,000 and has an 9% annual coupon. The bond has a current yield of 7.63%. What is the bond's yield to maturity? Round
Compute the realized rate of return for investors who purchased the bonds when they were issued and who surrender them today in exchange for the call price. Round your answer to two decimal places.
Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 15% rate on equity. Determine the value of Aggie.
You just found your dream car. The car will cost you $36,800. The dealer will lend you the entire amount at 3.9 percent interest, compounded monthly, for 48 months. What is the amount of the monthly
You would like to buy a boat and know you can afford boat payments of $225 a month for 5 years. The interest rate is 7.65 percent, compounded monthly. How much money can you afford to borrow?
Marcus, Inc. purchased a rare coin for $219,000 three years ago. Today, they resold that coin for $297,500. What annual rate of return did the firm earn on this investment?
What is firm-specific risk? Should an investor expect to be compensated for firm-specific risk in an efficient capital market? Why or why not?
What is the bid-ask spread? Would you expect it to be larger or smaller for more volatile stocks? Why?
Warren Buffett believes that "value will always in time be reflected in market price". Does this contradict with the beliefs of Graham and Buffet that you should always buy with a "margin of safety"
What did you learn from reading a summary of "A Random Walk Down Wall Street" and how will you apply it in your investing life? Is there anything that you don't agree with?
Dividend Reinvestment Plans (DRIPs) are rarely heard of, yet most publicly traded companies offer one. Briefly list the advantages of participating in a DRIP. Are there any potential disadvantages?
Graph the profit potential (if any) for this position. What is the maximum profit and the maximum loss the trader can incur? At what price of the stock does the diagonal spread break-even?