Suppose you observe the following situation:

Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate?
Shows all the step and formula. Don't round off until you get the answer.

2. Fascination Tool and Die began development for a new factory in the area around San Francisco, California. However, recent events have caused the city to shut down all construction, and withdraw building permits. Fascination has already invested $150,000 in the San Francisco building, but Dallas, Texas has offered the company an incentive to bring their factory there, instead. In Dallas, the factory would cost $8 million to build. In San Francisco, the company will incur $1.2 million in additional building costs, and will experience a 1-year delay before they are able to begin selling the product, which will mean only nine years of sales instead of ten. In Dallas, the city is also offering a $500,000 one-time up front cash incentive to convince companies to make the move. The factory in either location will build components for companies in California, so shipping them from Texas will be more costly. If the company abandons the San Francisco deal, they believe they would be able to recoup $340,000 by selling the partially finished building and land to a used car dealership. In Dallas, they will need to purchase land for $750,000 to build on. Regardless of which deal they choose, they believe the salvage value of the factory will decline rapidly, but they should be able to recoup $100,000 at the end of year 10 in either case, after which time, the product line will be obsolete, and no further production will be worthwhile. Over the 10 year period, however, either factory will be able to build 60,000 units per year. The selling price per unit is expected to be $140 each, and production costs at either plant are estimated at $36 per unit. The machinery, which initially cost $3 million, will be depreciated over 7 years, using the straightline method. Delivery cost per unit from Dallas will be $18 per unit more than from San Francisco. However, Fascination is convinced that the delays to construction will cause the company to miss the entire first year of production, while Dallas has smoothed the permitting process to allow speedy construction and eliminate that delay. The company anticipates that either project will require an additional $5 million in working capital to be committed for the life of the project, but that working capital can be recovered after the project is ended. The company's tax rate is 24%.

Given this scenario, determine and map out the relevant cash flows for capital budgeting. Then use Excel to build your spreadsheet for the 10-year calculations, and after developing your estimates of each year's cash flow under the two scenarios, use the NPV method to determine what decision the company should make regarding the factory. Assume a 9% cost of capital. Explain your answer, and turn in the spreadsheet detailing your calculations.

• Five years ago Dynamic Systems issued a 15-year bond with a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually. Today the going interest rate is 10 percent, and it is ex- pected to remain at this level for many years in the future. Compute the (a) current yield and (b) capital gains yield that the bond will gener- ate in the fifth year (Year 5) of its life.

A multi-national-corporation has receivables in a foreign currency. Circle on the correct answer for each question.

(1) [ Long or Short ] in the foreign currency forward contract.
(2) [ Long or Short ] in the foreign currency futures contract.
(3) [ Borrow or Lend ] denominate in the foreign currency.

(4) [ Long or Short ] in the foreign currency [ Call or Put] option.

Why as a Finance Major do you have to understand corporate finance? why should every finance student know this course?

Find the duration of a 8.4% coupon bond making semiannually coupon payments if it has three years until maturity and has a yield to maturity of 6.0%. What is the duration if the yield to maturity is 11.0%? Note: The face value of the bond is $100. (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Exercise 4.34. Suppose that you sell for $15 a call option with a strike price of $49, sell for $7 a call option with a strike price of $59, and buy for $10 each two call options with a strike price of $54. Assume a zero rate of interest.

(a) What is the maximum profit possible on the exercise date?

(b) What is the maximum loss possible on the exercise date?

(c) What is the maximum stock price at the exercise date that will result in you breaking even?

Ans: _____________________

1. You just graduated from Notre Dame de Namur University (2020) and accepted a job with Facebook in their Finance department. Your salary is $50,000 per year. You are considering investing $500 per month in your company’s 401K and given your risk profile your targeted rate of return is 4.5 percent. What will be the value of your 401K in 35 years (2055)?

Additional 2 bonus points...

Joe, a colleague of yours decided to wait for five years to begin setting aside $500 per month until 2055. His risk profile is like yours, 4.5%. How much will Joe have in 30 years (2055)?

And...”what’s the moral of this story>?

Ans: _______________________

The moral is: _____________________

The Fed offers three types of discount window loans. ______________ credit is offered to small institutions with demonstrable patterns of financing needs, _____________ credit is offered for short-term temporary funds outflows, and _____________ credit may be offered at a higher rate to troubled institutions with more severe liquidity problems.

A saver wants $100,000 after ten years and believes that it is possible to earn an annual rate of 8 percent on invested funds.

a) What amount must be invested each year to accumulate $100,000 if (1) the payments are made at the beginning of each year or (2) they are made at the end of each year?

b) How much must be invested annually if the expected yield is only 5 percent?

Please show step-by-step how to solve within excel

You have applied for a job with a local bank. As part of its evaluation process, you must take an examination of the time value of money analysis covering the following questions. Please show your work. (Identify N, I/Y, PV, PMT, and FV)

1. What is the present value of a 6-year, $100 ordinary annuity if the annual interest rate is 4%?
2. What is the EAR corresponding to a nominal rate of 8% compounded semiannually? Compounded quarterly? Compounded daily?

Company A offers you an initial salary of $150,000 with annual raises of 10% for the foreseeable future. Company B offers you $180,000 with annual raises of 8% for the foreseeable future.

A.) How many years will it take for the A salary to equal the B salary?

B.) How many years will it take for the total dollars received from A to equal the total dollars received from B?