You invest $2,000 in a certificate of deposit that matures after eight years and pays 5 percent interest, which is compounded annually until the certificate matures. Round your answers to the nearest dollar. a.How much interest will you earn if the interest is left to accumulate? b. How much interest will you earn if the interest is withdrawn each year?

35) The margin requirement on a stock purchase is 25%. You fully use the margin allowed to purchase 100 shares of MSFT at $25. If the price drops to $22, what is your percentage loss?

A) 9%

B) 15%

C) 48%

D) 57%

E) 60%

36) You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $50 per share. If you want to limit your loss to $2,500, you should place a stop-buy order at ____.

A) $37

B) $62.50

C) $56.25

D) $59.75

E) $65.25

37) An investor buys $8,000 worth of a stock priced at $40 per share using 50% initial margin. The broker charges 6% on the margin loan and requires a 30% maintenance margin. In 1 year the investor has interest payable and gets a margin call. At the time of the margin call the stock's price must have been ____.

A) $20

B) $29.77

C) $30.29

D) $32.45

E) $35.50

38) Consider a no-load mutual fund with $200 million in assets and 10 million shares at the start of the year and with $250 million in assets and 11 million shares at the end of the year. During the year investors have received income distributions of $2 per share and capital gain distributions of $.25 per share. Assuming that the fund carries no debt, and that the total expense ratio is 1%, what is the rate of return on the fund?

A) 11.19%

B) 23.75%

C) 24.64%

D) 25.20%

E) The answer cannot be determined from the information given.

39) Suppose you pay $9,700 for a $10,000 par Treasury bill maturing in 3 months. What is the holding-period return for this investment?

A) 3.01%

B) 3.09%

C) 12.42%

D) 16.71%

E) 17.50%

1(a). Company ABC has the following audited balance sheet amounts (under appropriate accounting rules):

Bank Loan (Floating rate = prime rate) = $100,000,000

Bonds (7% coupon, 10 years to maturity) = $2,000,000,000

Class A Common Stock (100,000,000 shares outstanding) = $1,000,000,000

Class B Common Stock (200,000,000 shares outstanding) = $2,000,000,000

If the YTM (yield to maturity) on the bonds is 6%, the stock price for Class A=$50 per share and for Class B = $50 per share, the beta of the company is 1.3, the risk-free rate is 2% and E(Rm) =9%, calculate the WACC.

(b) Using the numbers in (a), if the company issues $2,000,000,000 (market value) in 6% 20 year bonds to fund a new project, what is the new WACC?

(c) After issuing the debt in part (b), if the company’s new project is a failure and the company is now close to bankruptcy, what is the WACC if the stock price falls to $10 and the YTM is 10%? (Note: you have to calculate the new equity beta with the revised capital structure)

Post your thoughts and personal experience with Time Value of Money. expand with further examples of Time Value of Money in a real life. Indicate how this can apply to corporate finance. 

How will understanding finance and making correct financial decisions contribute to your general quality of life? What are parallels between how a successful business manages its money and how you manage yours?

Is there any industry where it would always make sense to keep excess inventory levels on hand? min 200 words

In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.31. The dividends are expected to grow at 16 percent over the next five years. The company has a payout ratio of 30 percent and a benchmark PE of 19. The required return is 14 percent.
    
What are the projected dividends for each of the next five years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,32.16.)
  

  
What is the EPS in five years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)
  
EPS in 5 years            $
  
What is the target stock price in five years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)
  
Stock price in 5 years            $
  
What is the stock price today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)
  
Stock price today            $

Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply:

1. The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.)
2. Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance.
3. The firm's tax rate is 25%.
4. The loan would have an interest rate of 13%. It would be nonamortizing, with only interest paid at the end of each year for four years and the principal repaid at Year 4.
5. The lease terms call for $410,000 payments at the end of each of the next 4 years.
6. Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $250,000 at the end of the 4th year.

1. What is the cost of owning? Enter your answer as a positive value. Do not round intermediate calculations. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.

   $   

2. What is the cost of leasing? Enter your answer as a positive value. Do not round intermediate calculations. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.

   $   

3. What is the NAL of the lease? Do not round intermediate calculations. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.

   $   

8. You are told today that you’ll inherit a castle from your uncle in 5 years. You’ll need to

pay a property tax of $500,000 on the castle in year 6. Then the property tax will go up

each year by 1%. You and your descendant are going to pay for the property tax each year

forever. Suppose the interest rate is 10% per year. If you want to set aside enough money

today to be able to make all the future property tax payment, how much money do you

need?

EOC 2.15

Suppose we observe the following rates:

One-year spot rate = 10%

Two-year spot rate = 14%

Expected one-year rate one year from now = 18%

If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity

premium for year 2?

In August 2019, the Business Roundtable changed the main purpose of a corporation from “to create value for investors” to “to benefit all stakeholder – customers, employees, suppliers, communities and shareholders.” What, if any, benefit do you see in this and how can you foresee this impacting your life?

1) What will be your monthly payment on a $480,000 15 and a 30 yr mortgage if the rate is 3.50 % for people with good credit and 10.5% for people with bad credit 4 calculations? A) Also, how much interest will you pay over the life of the 4 loans you just calculated? (The mortgage is $480,000 (not the price of the house) you may have to adjust a bank rate.com default of 20% down) B) Why would someone finance a house with a 10 year interest only loan (site 3 reasons)?

Appalachian Bank offers you a $135,000, 9-year term loan at 7.5 percent annual interest. What will your annual loan payment be? Semi-annual compounding.

1. Your portfolio consists of 1,000 shares of stock A and 1,000 shares of stock B. At today's market open their respective prices per share are $7.50 and $21. What are their respective weights in the portfolio at today's market open prices? (rounded to two decimals).

   		They have equal weights
   		0.40 and 0.60
   		0.35 and 0.65
   		0.26 and 0.74.

1 points   

QUESTION 32

1. What is your portfolio's beta if stock A's beta is 1.8 and that of B is 0.4.

   		0.76
   		1.10
   		1.00
   		0.9
   		0.86

Based on the CAPM what is the 1-year expected return on stock A, if the risk-free rate is 1% and the expected return on the market is 12%. ?

Given today's open price, what is the expected 1-year return on stock B, if it does not pay dividends, and if you expect that one-year hence the stock will sell for $23.0?

1. Based on the CAPM, stock A is overpriced at today's market open.

   		TRUE
   		FALSE.

   Based on the CAPM stock B is overpriced at today's market open.

   		TRUE
   		FALSE.

   Based on the CAPM what should be the expected return on your portfolio?

   		12.89%
   		11.46%
   		8.99%
   		9.87%
   		9.36%