#13. You own a house worth $250,000 and intend to insure it fully against fire for the next year. Suppose the probability of its burning to the ground during the year is .0001 and that an insurance policy covering the full value costs $500.

Consider the insurance policy as a security.

a. What is the expected holding-period return?

b. What is the standard deviation of it HPR

c. Would you consider this policy to be a very risky asset? Why or why not?

This is not in my notes and I am unsure how to work the solution

Consider a 19-year bond with 13 percent annual coupon payments. The market rate (YTM) is 6.6 percent for this bond. The current yield of the bond is _______ percent. Answer it in percentage without the % sign, and round it to two decimal place, e.g., 5.69.

In a short paragraph, can you describe the primary attributes of a limited liability company? Why would you choose an LLC over a corporation?   Why not?

5. Indicate which statement is True (T) or False (F). a. _____When making a market on an option the bid is less than the offer. b. _____If the stock price is greater than the strike price the the call option is “out-of-the money” c. ______ Puts and Calls leveage profits and losses. d. ______ For the same stock and strike price an option with a more distant expiration will be worth less than an option with a nearer expiration. e. ______ A straddle involves both calls and puts of the same expiration and strike. f. ______ Short a Put is “bearish”. g. ______The “butterfly” involves both calls and puts. h. ______An out of the money option has no “intrinsic value”. i. ______ The greater the price of the stock the greater should be the price of a call option. j. _______ The lesser the price of stock the lesser should be the price of a put option.

ssume a corporation's bond has 14 years remaining until maturity. The coupon interest rate is 9.6% and the bond pays interest semi-annually. Assume bond investors' required rate of return on the bond is 8.3%. What would be the expected market price of this bond. (Assume a $1000 par value.) Answer to 2 decimal places.

​(Operating leverage​)

The Quarles Distributing Company manufactures an assortment of cold air intake systems for​ high-performance engines. The average selling price for the various units is $500.

The associated variable cost is $300 per unit. Fixed costs for the firm average $160,000annually.

a. What is the​ break-even point in units for the​ company?

b. What is the dollar sales volume the firm must achieve to reach the​ break-even point?

c. What is the degree of operating leverage for a production and sales level of 6,000units for the​ firm? (Calculate to three decimal​ places.)

d. What will be the projected effect on earnings before interest and taxes if the​ firm's sales level should increase by 45

percent from the volume noted in part (c​)?

You borrow $29,000 to buy a car. You plan to payoff the car within 6 years and the APR on the car loan is 2.99%. Using an excel to create an amortization for this car payment for 72 months. Please print out your excel and turn it in for 6 points extra credit on the test. You need to turn in your own work.

1) What responsibility do treasury professionals typically have in regards to budgets?

a. Treasury professionals use budgets primarily for planning and variance analysis.

b. Treasury professionals need to assess the impact budgets have on debt covenants but not credit ratings.

c. Treasury professionals use budgets as an input to their work but are not responsible for the budgeting process.

d. Budgets may require treasury professionals to change how they handle short-term assets to maintain overall liquidity.

Group 1: You won $5,000,000 in the Massachusetts Lottery's Halloween Bonanza game. It pays out 10 years from now. How much is it worth today?

Group 2: You won a similar prize, but it pays out $500,0000/yr for the next 10 years.

Group 3: You won a prize that pays out $600,000/yr for the next 15 years.

Groups, what is your prize worth today assuming a 2% interest rate? Which prize would you rather receive assuming it is taxable at a 55% tax rate? Please explain your answer with all calculations.

Assume Highline Company has just paid an annual dividend of $ 0.92. Analysts are predicting an 10.3 % per year growth rate in earnings over the next five years. After​ then, Highline's earnings are expected to grow at the current industry average of 5.3 % per year. If​ Highline's equity cost of capital is 9.1 % per year and its dividend payout ratio remains​ constant, for what price does the​ dividend-discount model predict Highline stock should​ sell?

Australian corporate bonds can now be issued with the same prospectus as for previous issues, simplifying the process.

As a result, the corporate bonds' yield __________ while the stock of bonds in the financial system ___________.

Nonconstant growth: Tre-Bien, Inc., is a fast-growing technology company. Management projects rapid growth of 30 percent for the next two years, then a growth rate of 17 percent for the following two years. After that, a constant-growth rate of 8 percent is expected. The firm expects to pay its first dividend of $2.45 a year from now. If dividends will grow at the same rate as the firm and the required rate of return on stocks with similar risk is 22 percent, what is the current value of the stock?

Nonconstant growth: Management of ProCor, a biotech firm, forecasted the following growth rates for the next three years: 35 percent, 28 percent, and 22 percent. Management then expects the company to grow at a constant rate of 9 percent forever. The company paid a dividend of $1.75 last week. If the required rate of return is 20 percent, what is the value of this stock?

NO EXCEL PLEASE. If you do use it please explain how getting each answer. Thank you so much

3. A property consists of 8 office suites, 3 on the first floor and 5 on the second floor. The contract rents are as follows: 2 suites at $1,800 per month, 1 at $3,600 per month and 5, at $1,560 per month. Annual market rent for all suites increase 3% per year after the first year. Vacancy and collection losses are estimated at 10% of potential gross rent per year. Operating expenses and reserve for replacement or capital expenditures are 45% of effective gross income each year. The expected holding period is 5 years. At the end of the holding period you are expecting to sell the property for $1,180,472.

A. Prepare the first year pro forma generating the NOI for year 1.

B. The information below represents the NOI and sales price for 5 comparable properties. Using the information provided from the market we can see that the average cap rate is 8.4%. Using this average cap rate obtained below and the NOI obtained in question A, what is your estimate of value via the direct capitalization approach?

Year 1 Sales

NOI Price   Ro

A 80000 / 919540 = 0.087

B 114000 / 1390244 = 0.082

C 100000 / 1250000 = 0.080

D 72000 / 808989 = 0.089

E 90000 / 1097561 = 0.082

Average = 0.084

C. With the growth rate in income, the expected holding period of 5 years and the sales price estimate at the end of the holding period, estimate the present value of the property via the discounted cash flow approach with a discount rate of 10%.

D. I obtained the following information on 3 sales that includes the sales price and the one year income. Using the income multiplier give your estimate of value for the subject property based on your Effective Gross Income calculated in question A.

A B C

Recent sales prices 1,044,120 1,151,720 904,050

Effective Gross Income   158,200 175,300 143,500

Income multiplier 6.60    6.57 6.30

You have the following information about Burgundy Basins, a sink manufacturer.

Burgundy is contemplating what for the company is an average-risk investment costing $52 million and promising an annual ATCF of $5.6 million in perpetuity.

a. What is the internal rate of return on the investment? (Round your answer to 2 decimal places.)

b. What is Burgundy's weighted-average cost of capital? (Round your answer to 2 decimal places.)

You have just been offered a 12% bond for $1150. These bonds mature in 6 years. Find the required rate of return.