Intro

The real short-term risk-free rate is 0.5% and expected to stay constant. The inflation rate is expected to be 1.4% this year, 2% for each of the following 5 years, and 2.5% thereafter. The maturity risk premium is expected to be 0.0004 * T, where T is the number of years to maturity.

Attempt 2/5 for 10 pts.

Part 1

What is the expected yield on a 1-year Treasury bill?

Part 2

What is the expected yield on a 3-year Treasury note?

Part 3

What is the expected yield on a 30-year Treasury bond?

Interest rate for an annuity Personal Finance problem: Anna Waldheim was seriously injured in an industrial accident. She sued the responsible parties and was awarded a judgment of $1,000,000. Today, she and her attorney are attempting a settlement conference with the defendants. The defendants have$124,made an initial offer of $72,649 per year for 30 years. Anna plans to counteroffer at $124,144 per year for 30 years. Both the offer and the counteroffer have a present value of $1,000,000, the amount of the judgment. Both assume payments at the end of each year.

a) what interest rate assumption have the defendents used in their offer (round to nearest whole percent) = 6%

b)what interest rate assumption have Anna and her lawyer used in their counteroffer (round to nearest whole perecent)? =12%

c) Anna is willing to settle for an annuity that carries an interest rate assumption of 9%. What annual payment would be acceptable to her?

C: If Anna is willing to settle for an annuity that carries an interest rate assumption of 9%, she would be willing to accept an payment of $...............(round to the nearest dollar). My answer of $97,336 was incorrect. What is the correct answer for this problem?

Thanks for your help!

Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $54 per share. She borrows $2,600 from her broker to help pay for the purchase. The interest rate on the loan is 11%. a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $44 per share by the end of the year, what is the remaining margin in her account? (Round your answer to 2 decimal places.) c. If the maintenance margin requirement is 30%, will she receive a margin call? Yes No d. What is the rate of return on her investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $27.70 per share. On March 1, a dividend of $3.30 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $22.00 per share. You paid 25 cents per share in commissions for each transaction. a. What is the proceeds from the short sale (net of commission)? b. What is the dividend payment? c. What is the total cost, including commission, if you have to cover the short sale by buying the stock at a price of $22.00 per share? d. What is the net gain from your transaction?

Consider a mutual fund with $219 million in assets at the start of the year and with 12 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $6 million. The stocks included in the fund's portfolio increase in price by 7%, but no securities are sold, and there are no capital gains distributions. The fund charges 12b-1 fees of 0.50%, which are deducted from portfolio assets at year-end. a. What is the net asset value at the start and end of the year?

What is the rate of return for an investor in the fund?

Moody Farms just paid a dividend of $2.65 on its stock. The growth rate in dividends is expected to be a constant 3.8% per year indefinitely. Investors require a return of 15% for the first 3 years, a return of 13% for the next 3 years, and a return of 11% thereafter. What is the current share price? Please work step by step in Excel, thanks so much!

Evaluating risk and return. Stock X has an expected return of 9.5 percent, a beta coefficient of 0.9, and a 30 percent standard deviation of expected returns. Stock Y has a 13 percent expected return, a beta coefficient of 1.3, and a 20 percent standard deviation. The risk-free rate is 5 percent, and the market risk premium is 5.5 percent.

a) Calculate the coefficient of variation of each stock.

b) Which stock is riskier for diversified investors? Which stock is riskier for undiversified investors?

c) Use the CAPM model to calculate each stock’s required rate of return.

d) On the basis of the two stocks’ expected and required returns, which stock would be more attractive to a diversified investor?

e) Calculate the required return of a portfolio that has $7,000 invested in Stock X and $3,000 invested in Stock Y.

f) If the market risk premium increased to 6.5 percent, which of the two stocks would have the larger increase in its required return? Why would the market risk premium increase?

a. A 10-year 5% coupon bond has a yield of 8% and a duration of 7.85 years. If the bond yield increases by 60 basis points, what is the percentage change in the bond price?

b. Alpha Insurance Company is obligated to make payments of $2 million, $3 million, and $4 million at the end of the next three years, respectively. The market interest rate is 8% per annum.

i. Determine the duration of the company’s payment obligations.

ii. Suppose the company’s payment obligations are fully funded and immunized using both 6-month zero coupon bonds and perpetuities. Determine how much of each of these bonds the company will hold in the portfolio.

I would like to know the answer of question bi and bii.

Halliford Corporation expects to have earnings this coming year of $3.00 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two​ years, the firm will retain 50% of its earnings. It will then retain 20% of its earnings from that point onward. Each​ year, retained earnings will be invested in new projects with an expected return of 25.00% per year. Any earnings that are not retained will be paid out as dividends. Assume​ Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If​ Halliford's equity cost of capital is 10.0%, what price would you estimate for Halliford​ stock?

Write a brief summary of the explantation of the shape of the term structure of interest rates: Liquidity Premium Theory

By maximizing the price per share of a common stock, we will ensure shareholders' wealth is maximized.

True

False

Upton Corporation is expected to pay the following dividends over the next four years: $16, $12, $11, and $7.50. Afterwards, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 16 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Please provide as many details as possible on formulas and calculations (Excel preferred). Thank you.

Please provide details as much as possible with formulas and calculations (excel is preferred). Thank you.

Assume a purchase price of $10 Million for both properties.

(a) What is the expected total return (IRR) on a 10-year investment in each property? Use a

financial calculator or equation solver for this.

(b) If the 10% cap rate represents a fair market value for each property, then which property must

be the riskier investment, so that no mispricing has occurred?

(c) What is the approximate annual growth rate in operating cash flows for each building during

first nine years? This is simply the percentage-change in cash flows.

(d) How is the growth rate related to the cap rate and the investor's IRR in each property?

Assuming each property is priced at its required rate of return (i.e. making it NPV=0), what

general economic relationship discussed in class does this show?

Yuri is willing to invest $30,000 for six years, and is an economically rational investor. He has identified three investment alternatives (X, Y, and Z) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the six-year investment period, complete the following table and indicate whether Yuri should invest in each of the investments.

Note: When calculating each investment’s future value, assume that all interest is earned annually. The final value should be rounded to the nearest whole dollar.