Describe the difference between business risk and financial risk using appropriate example

Q: The following table shows annual rates t Loan 30-Year 15-Year 5-Year Type Mortgage Mortgage Car Loan…

A: When the lender lends a loan to the borrower, he charges a rate of interest on the borrowed amount.…

Q: A stock just paid a dividend of $1.5 and the dividend is expected to grow at a constant rate of 3%…

A: Current dividend = d0 = $1.5 Growth rate = g = 3% Rate of return = r = 13%

Q: A pension fund projects its cash flow obligations to be constant at $5Mln for the next 10 years and…

A: Present value is the equivalent value of money based on time and interest rate of the cash flow that…

Q: Create an amortization table for a 15-yr fully amortizing, 6% loan for $10 million. Assume annual…

A: Amortization of loans is an important application of the time value of money. It helps to know the…

Q: A stock is expected to paid a dividend of f $2.9 you just sold it for $218.  If you bought it for…

A: A stock's return is the change in its price over a period of time, plus any dividends or other…

Q: You estimate a college education will be $300,000 when your child enters college in 18 years. You…

A: The question is based on the calculation of required rate of return in future value of money…

Q: A financial analyst for zzz corporation is evaluating the cost of an investment in required…

A: NPV of -5746639 has an equivalent annual cost of-1,000,000. The cost of capital and number of years…

Q: A put option will mature in six months. The standard deviation of the underlying stock returns is…

A: The Black-Scholes model is a mathematical formula used to calculate the fair price or theoretical…

Q: You have the opportunity to purchase a perpetuity which pays $5,000 annually forever. If you require…

A: A perpetuity is a stream of fixed periodic cash flows ( annuity) of infinite duration

Q: You are a U.S. importer and just placed an order of antiques worth £100,000 from a U.K supplier. You…

A: One of the techniques for hedging foreign exchange risk is the money market hedge. It helps to lock…

Q: The following table shows annual rates for various types of loans in 2015. Assume monthly payments…

A: A mortgage is a covered loan that has been taken out to purchase property with the property itself…

Q: Part I: Joe just graduated from College and has found a nice job. As a graduation gift his father…

A: Hi, there, Thanks for posting the question. As per our Q&A honour code, we must answer the first…

Q: Sikele Trading company had 122 stores in 2010 and at the end of 2017 had 41 stores. What was the…

A: Number of store in the beginning = nb = 122 Number of store at the end = ne = 41 Time = t = 7 (2010…

Q: A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year…

A: Net present value refers to the difference between the present value of cash inflows and outflows.…

Q: Increasing the down payment on a mortgage reduces both the size of the monthly payments and the…

A: Loan amount=$158,000 Down payment=$27,000 Increase in down payment =$9,000 Interest rate=5% Time…

Q: mortgages. All

A: First finding the annual payment for 15 years, @ 8.5% = 0.085 , for a loan amount $,120,000 Let x…

Q: Find the periodic withdrawals PMT for the given annuity account. HINT [See Quick Example 4.] (Assume…

A: An annuity is an equal series of periodic payments at a predetermined rate of interest for a…

Q: Weber Interstate Paving Co. had $450 million of sales and $225 million of fixed assets last year, so…

A: Given, Sales = $450 Million Fixed Assets = $225 Million FA/Sales ratio = 50%

Q: QUESTION 9 Target is thinking about opening a new line of 10 high end fashion boutiques. These new…

A: WACC is the minimum required return on capital that is expected by the investors. It is based on…

Q: Bond Value Coupon rate Interest Due Maturity Require Rate of Return Offered Price 10,000 8%…

A: All the characteristics of  bond have been provided. The approximate and the exact YTMs are to be…

Q: Suppose you have been hired as a financial consultant to Defense Electronics, Incorporated (DEI), a…

A: Salvage value is the ending value of the project at which equipment are sold and if this selling…

Q: For this exercise, use the following information: Total fixed costs are estimated at $100,000. Total…

A: Break even point is the point where total revenue is equal to total cost.In other words, break even…

Q: Ibez Company is considering a project that requires an initial investment of $72,000 and will…

A: The difference between the current value of cash inflows and outflow of cash over a period of time…

Q: How do you calculate the current value (price) of a bond? Explain through the formula and its…

A: Bond is a debt fund  that is issued in connection with borrowing from outside. It implies that the…

Q: Determine the necessary working capital using the maximum deficit method, for project "X" with the…

A: Working capital, commonly called net working capital (NWC), is the difference between a company's…

Q: How do you calculate inflation premium

A: Inflation refers to the sustained increase in the general level of prices of goods and services in…

Q: You are looking to get a 30 year mortgage at 4%. You can afford $1,000 per month. a) What is the…

A: A mortgage is a type of loan used to purchase a property or real estate. The borrower (homebuyer)…

Q: What iS the fair market price today for an annuity that pays you $350 at the beginning of each month…

A: Annuity refers to the series of payment at regular interval for certain period.

Q: n your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's…

A: To achieve more growth company have to increase the assets and money is required for that, it may be…

Q: Provo, Inc., had revenues of $10 million, cash operating expenses of $5 million, and depreciation…

A: FCF refers to free cash flow. It is the amount of money that a company has after it pays for its…

Q: What is the total return for each bond in each year? Round your answers to two decimal places.…

A: A bond is an instrument used by firms to raise debt capital from the market instead of traditional…

Q: If the market value and the intrinsic value of a stock differ; O a. the stock sells for its fair…

A: Intrinsic value is the actual value of the stock which is best on the fundamental factor that can be…

Q: 2. Wilson estimates that it will cost $85,000 to send his two year old son to ASU in 16 years. He…

A: Time value of money is one of the important concept being used in finance. This concept says that…

Q: Jillian invested $2,000 six years ago at 4.5 percent interest. She spends all of her interest…

A: Data given: Amount invested=$2000 Interest rate=4.5% Jillian spends all of her interest earnings…

Q: Find the present value PV of the annuity account necessary to fund the withdrawal given. (Assume…

A: A series of periodic payments made at each regular interval is recognized as an annuity. The current…

Q: How much money would you have to deposit EVERY year for 10 years into an investment earning 5%…

A: Data given: FV=$ 50,000 n=10 years Rate=5% (annual compounding)   Required: Amount to be deposited…

Q: To finance the development of a new product, a company borrowed $46,400 at 3.94% compounded…

A: The sum borrowed or loan taken to meet any specific personal or business requirement is regarded as…

Q: A trader creates a bear spread by selling a six-month put option with a $25 strike price for $1.51…

A: In case of bear put spread strategy, one put option with higher strike price is purchased and…

Q: Maggie's Muffins, Inc., generated $2,000,000 in sales during 2016, and its year-end total assets…

A: A company is on its growth path. However, external capital is usually required to support the growth…

Q: worth

A: Given that value of the firm currently = $ 5 M (millions) Unlevered Cost of Equity = 9%,  As in the…

Q: ear 4 34,000 e company should use a desired rate of return of 10 percent to ct. (PV of $1 and PVA of…

A: NPV (Net Present Value) = Total of the discounted cash inflows - Initial outflows Here initial…

Q: em? item? two purchases?

A: To calculate the monthly savings required for the sinking fund, we can use the present value of an…

Q: Jesse has a good job and pays off his one credit card every month. He was surprised that when he…

A: A credit report is an important document in the world of finance. It is simply a statement that…

Q: Part D: Investment Decisions Now consider that Luxio has identified the following two mutually…

A: The NPV is used to measure a project's profitability. It discounts future cash flows to find out the…

Q: Suppose

A: The theoretical forward exchange rate can be calculated using the interest rate parity formula as…

Q: Gilley Weed Diving Co. has a total monthly disbursement float of $180,000. Assuming 30 days in a…

A: Disbursement float refers to the situation when the company makes a payment or provides check-in…

Q: thank you for the prompt response to my question. Where did you calculate the 0.79 from in this…

A: The previous answer assumes that the column titled " Market Risk premium (Rm - Rf): Global Market"…

Q: The cost of equity using the discounted cash flow (or dividend growth) approach Grant Enterprises's…

A: The value of the stock can be found as the present value of the dividends and the present value of…

Q: Hungry Whale Electronics is considering an investment that will have the following sales, variable…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: b. Calculate the upfront amount that she should pay under the alternative payment agreement so that…

A: Equivalent value today is present value of both payments based on time and interest rate off money…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.