Consider a 30-year $1,000 face bond with a coupon rate
Question Consider a 30-year $1,000 face bond with a coupon rate of 2.5%, a ytm of 3%, and a price of 925.21. The bond pays coupons semi-annually and has a duration of 15.66 years. 1) What is this bond’s modified duration?Now suppose the bond’s ytm increases to 4%. 2) Using modified duration, approximately what will be the bond’s new price?
In the net present value (NPV) approach to investment appraisal
Question In the net present value (NPV) approach to investment appraisal the discount rate is NOT intended to take into account:
A stock just paid a dividend of $1.68. The dividend
Question A stock just paid a dividend of $1.68. The dividend is expected to grow at 26.38% for three years and then grow at 4.07% thereafter. The required return on the stock is 10.60%. What is the value of the stock?Please show steps on a finical calculator.
Define the c%-VaR to be the value |v| such that
Question Define the c%-VaR to be the value |v| such that there is only a c% chance that the loss from an investment will be greater than c.a). Derive a formula for 5%-VaR on an investment with gain G that is normally distributed with mean mu and standard deviation sigma. b). If G has mean mu = 15 and sigma = 1.8, compute the 5%-VaR on this investment.
How will the trade war between the United States and
Question How will the trade war between the United States and China affect the stock market?
8.1 What is the effective annual interest rate if the
Question 8.1 What is the effective annual interest rate if the nominal annual interest rate is 48% per year compounded monthly? a.) 24.00% b.) 26.82% c.) 60.1% d.) 64% 8.2 A deposit of $3,000 is made in savings account that pays 7.5% interest compounded annually. How much money will be available to the depositor at the end of 16 years? a.) $8,877 b.) 10,258 c.) $9,540 d.) $943
The Itsar Products Company has made the following monthly estimates
Question The Itsar Products Company has made the following monthly estimates of cash receipts and cash disbursements when preparing cash budgets for the next twelve months. Itsar Products has beginning cash on hand of $10,000 and wants to maintain this minimum cash level throughout the next year. Determine whether Itsar Products will have a cash need during the next year. The first few cells are completed as an exampleA. If Itsar Products has a cash need, indicate the month when the need will begin and determine the month and amount when the maximum need will occur. · A cash need will first occur in ____________________ when ________________ will be needed. · The largest monthly cash need occurs in ___________________ when _____________ will be needed. · The maximum cumulative cash need will occur in ________________ when _________________ will be needed. B. Determine whether the cash need can be repaid within the next year. ATTACHMENT PREVIEW Download attachment Capture24.JPG
A. Calculate the inventory-to-sale conversion period for 2016. B. Calculate
Question A. Calculate the inventory-to-sale conversion period for 2016. B. Calculate the sale-to-cash conversion period for 2016. C. Calculate the purchase-to-payment conversion period for 2016 D. Calculate the length of Munich Exports’ cash conversion cycle for 2016. ATTACHMENT PREVIEW Download attachment Capture25.JPG
If a person borrows $12455.37 and agrees to pay it
Question If a person borrows $12455.37 and agrees to pay it back in 60 monthly installments of $550.55, determine the (a) effective interest rate paid (corresponding with payment frequency units). Show the units for the interest rate. (b) nominal interest rate paid. Show the units for the interest rate. (c) effective annual interest rate paid. Show the units for the interest rate.
If an asset has an initial cost of $ 30,000,
Question If an asset has an initial cost of $ 30,000, a salvage value of $ 6,000, and a depreciation life of 20 years, determine the depreciation amount and the book values for the fourth year using : (a) Straight Line Depreciation (b) Sum of years Digits Depreciation (c) Sinking Fund Depreciation with i= 10 %
What is the present value for the following series if
Question What is the present value for the following series if i=5% per YCY, EOY Amount 0 1 0 2 100 3 200 4 300 a.) $510.3 b.) $400 c.) $259 d.) $200
The risk-free rate is 2.06% and the market risk premium
Question The risk-free rate is 2.06% and the market risk premium is 5.41%. A stock with a β of 1.41 just paid a dividend of $2.40. The dividend is expected to grow at 23.94% for three years and then grow at 3.04% forever. What is the value of the stock?
Question 1:Assume you expect a company’s net income to remain
Question Question 1:Assume you expect a company’s net income to remain stable at $2,000 for all future years, and you expect all earnings to be distributed to stockholders at the end of each year, so that common equity also remains stable for all future years (assumes clean surplus). Also, assumethe company’s β = 1.5, the market risk premium is 6% and the 20-year yield on risk free treasury bonds is 2%. Finally, assume the company has 1,000 shares of common stock outstanding.a. Use the CAPM to estimate the company’s equity cost of capital.•b. Compute the expected net distributions to stockholders (dividends) for each future year.c. Use the dividend discount (i.e., free cash flow to equity investors) valuation model toestimate the company’s current stock price.Use the same facts as in Q1 above, but assume you expect the company’s income to be$2,000 in the coming year and to grow at the rate of 5% in every subsequent year intoinfinity. Also, assume that the company’s common equity as of the end of the most recentfiscal year is $12,000, and the investment needed to support the growth in net income causesshareholders’ equity to increase by 5% each year. Assume the company is an all-equity firm; i.e., all financing comes from stockholders and none comes for debtholders. In this case, thecompany’s balance sheet has net operating assets (NOA) of $12,000, shareholders’ equity of $12,000, and zero net financial obligations (ie zero net debt).a. Compute dividends (or free cash flow to equityholders) for the coming year and the rate of growth in dividends for every year thereafter.b. Use the dividend discount (i.e., free cash flow to equity investors) valuation model toestimate the company’s current stock price.1Question 3.Same facts as Q2 above, except the 5% income growth rate (and beginning of year common equity to support it) are only expected for years 2 and 3. Then growth is expected to be zero and all income is expected to be distributed to shareholders for all future years.a. Compute the dividend payment for the next three year, and then dividends for all future years.b. Use the dividend discount (i.e., free cash flow to equity investors) valuation model toestimate the company’s current stock price.Question 4.Same facts as Q3 above, except the growth rates for income and beginning of yearshareholders’ equity are 5% for years 2 and 3 and then 3% perpetually for all future years.a. Compute dividends for the next three years and then growth in dividends for all future years.b. Use the dividend discount (i.e., free cash flow to equity investors) valuation model toestimate the company’s current stock price.Question 5.Same facts as Q2 above, except derive the value of the company and the price per common share using the earnings-based valuation model.a. Compute residual income (ie abnormal earnings) for the next three years, and verify that residual income is growing at a constant rate. What is that rate?b. Use the residual income (abnormal earnings) model to derive the value of the firm and the price per common share. Compare your answer to the answer you got using the free cash flow to equity investors (dividend discount model) in Q2 above.Question 6.Same facts as Q4 above, except derive the value of the firm and the price per common share using the earnings-based valuation model.2a. Compute residual income for the next 5 years, and verify that residual income is growing at a constant rate after year 3. What is that rate?b. Use the residual income (abnormal earnings) model to derive derive the value of the company and the price per common share. Compare your answer to the answer you got using the free cash flow to equity investors (dividend discount model) in (4) above.c. Define the concept of residual income (abnormal earnings).d. Explain why positive (negative) residual income in all future periods causes price-to-book ratios greater (less) than one.•See your computation of residual income in (a) above and notice the effect of positive and negative values added to the book value of common equity in the computation of value in (b) above.•In this example, what is the company’s P/B ratio? Why is it greater or less than 1.0?
Consider the flow theory of exchange rate determination. (a) Explain
Question Consider the flow theory of exchange rate determination. (a) Explain the role of activities of each account of balance of payment accounts in shaping demands for and supplies of currencies in foreign exchange market. ATTACHMENT PREVIEW Download attachment 1.PNG
Shlomo Benartzi, a renowned behavioral economist, explores the inexplicabilities that
Question Shlomo Benartzi, a renowned behavioral economist, explores the inexplicabilities that surround our inability to think of saving as a process occurring in the present. He points out that “self-control is not a problem in the future […] it’s only a problem now when the chocolate is next to us.” Benartzi is a professional who is dedicated toward building a world where people can learn to manage their money in a better way. See the talk at the following the link below and comment on whether you can use his ideas for both personal benefit as well as how corporations can use this concept for achieving their goals of financial management.VideoTED Talk. (2011). Saving for tomorrow, tomorrow [Video file]. Retrieved from https://www.ted.com/talks/shlomo_benartzi_saving_more_tomorrow?language=en
Could you please help with the question posted above? ATTACHMENT
Question Could you please help with the question posted above? ATTACHMENT PREVIEW Download attachment Screen Shot 2019-07-10 at 5.04.49 PM.png 1. Jon Snow is a stockbroker who lives with his wife, Daenerys Targaryen, and their three dragons in Westeros. Jon firmly believes that the only way to make money in the market is to follow an aggressive investment i.e. to use margin trading. In fact, Jon has built a margin account over time. He currently holds $75,000 worth of stock in his margin account, though the debit balance in the account amounts to only $30,000. Recently Jon uncovered a stock that, on the basis of extensive analysis, he feels is about to take off. The stock, Night King Essentials (NKE), currently trades at $20 per share. Jon feels it should soar to at least $50 within a year. NKE pays no dividends, the prevailing initial margin requirement is 50%, and margin loans are now carrying an annual interest charge of 10%. Because Jon feels sostrongly about NKE, he wants to dosome pyramiding by using his marginaccount to purchase 1,000 shares of the stock. (a) Discuss the concept of pyramiding here. (b) Jon’s account is in what present margin position? (c) Jon buys the 1,000 shares of NKE through his margin account. i. What will the margin position of the account be after the NKE transaction if Jon follows the prevailing initial margin (50%) and uses $ 10,000 of his money to buy the stock? ii. What ifhe uses only $2,500 equity and obtains a margin loan for the balance ($17,500)? iii. How do you explain the fact that the stock can be purchased with only 12.5% margin when the prevailing initial margin requirement is 50%? (d) Assume that Jon buys 1,000 shares of NKE stock at $20 per share with a minimum cash investment of $2,500 and that the stock does take off and its price rises to $40 per share in one year. i. What is the return on invested capital for this transaction? ii. What return would Jon have earned if he had bought the stock without margin-that is, if he had used all his own money? (e) What do you think of Jon’s idea to pyramid? What are the risks and rewards of this strategy?
Suppose you are the money manager of a $10 million
Question Suppose you are the money manager of a $10 million investment fund. The fund consists of three stocks with the following investments and betas: Stock InvestmentBetaX5,000,0000.15Y3,000,0001.70Z2,000,0001.10 If the market’s required rate of return is 12% and the risk-free rate is 2.50%, what is the fund’s required rate of return?
Voltron Inc. expects to pay abnormal dividends over each of
Question Voltron Inc. expects to pay abnormal dividends over each of the next 3 years of $1.00 at the end of this upcoming year, $2.00 and the end of the second year, and $3.00 at the end of the third. If the growth is then expected to level off at 5.0%, and your required rate of return is 10.0%, then how much should you be willing to pay for this stock.A. What is the horizon term?B. What is the horizon value?C. What is the present value of the stock (P0)?
Given the following information for Easter’s Egg Emporium (EEE), calculate
Question Given the following information for Easter’s Egg Emporium (EEE), calculate the expected return, dividend yield, and capital gains yield. (Make sure to clearly label each yield) Stock price $51.75 Next expected annual dividend $3.50 Growth rate 4.50%
A firm can buy a new printer for 2,000 payable
Question A firm can buy a new printer for 2,000 payable immediately, the new printer would save the firm 2,000 the first year of operation,4,000 in the second year and 2,000 in the fifth year. The firm receives no savings from the printer the third or fourth year of it’s life and will need to spend 4,000 on it in the third year due to expensive repairs. The machine is scraped at the end of five years but there is no scrap value.As an alternative to outright purchase the firm could hire a printer paying 1,000 per year in advance for the five years.The firm would still expect to make the same costs and savings as in the hire company would meet the repair cost of year three.If the going rate of interest is 10% using net present value, advise the firm as to which of the methods (buy or hire) should be used to obtain the printer?
A 3-year $1000 face value bond pays an annual coupon
Question A 3-year $1000 face value bond pays an annual coupon of 2% and has a ytm of 3%. What is this bond’s price? What is this bond’s duration? Answer this question the long way, e.g., calculate the bond price as the present value of future cash flows.
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