If an investor owns a building that is just 100% leased to the U.S. Treasury with a 10-year lease, and assuming he is going to sell the building and retire when this lease expires, which of the following is the risk factor that is LEAST concerning to him?
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If an investor owns a building that is just 100% leased to the U.S. Treasury with a 10-year lease, and assuming he is going to sell the building and retire when this lease expires, which of the following is the risk factor that is LEAST concerning to him?
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- Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false? If the lease term is one year or longer, a liability must be recognized. If the lease term is less than one year, an asset must be recognized. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.You are an investor in the world where short-selling assets is prohibited. Suppose that the price of asset X in period 0 is $200. This asset will pay a dividend of $8 one year from now in period 1. Let the riskless interest rate from 0 to period q be 5%.Assume the price for a future contract delivery in period 1 is $210. a) Can you make an arbitrage profit when $210 is the price? If so, state specifically what financial transaction? b) Now, assume the price for a futures contract with delivery in period 1 is K190. Can you make an arbitrage profit when this is the price? If so, state specifically what financial transaction you would make in 0 and period 1 to realize a profit. If not, explain?Suppose that you have invested in a principal-only CMO with an expected life of 8 years. What likely will happen to the duration of your security if mortgage interest rates decrease by 2%? The duration will increase The duration will decrease The duration won't change, because the security is guaranteed by the U.S. government Not enough information
- You are thinking about buying a real estate property. If you buy the property, you think you will sell it for $829826 in 13 years. If your required return on investments of this risk is 16.17%, what is the most that you should be willing to pay for the property? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate.RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 15% per year?On May 25, 2018 you purchased an option which will allow you to sell a commercial building on August 14, 2022 for $42 million. Your current estimate of the value of the commercial building is $38 million. The annual volatility for the change in the commercial building’s value is 57% and the risk-free rate is 6%. a. What type of option is this? b. Calculate the value of the option to sell the commercial building. Please show work using excel
- RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 15% per year? Solve by speadsheet function or factor.A DI has the following assets in its portfolio: $20 million in cash reserves with the Fed, $20 million in T-bills, and $50 million in mortgage loans. If it needs to dispose of its assets at short notice, it will receive only 99 percent of the fair market value of the T-bills and 90 percent of the fair market value of its mortgage loans. If the DI waits one month to liquidate these assets, it would receive the full fair market value for each security. Calculate the one-month liquidity index using the previous information.Suppose the gold price is $300/oz., the 1-year forward price is 310.686, and the continuously compounded risk-free rate is 5%. a. What is the lease rate? b. Demonstrate a cash-and-carry strategy that provides the zero cash flow at time 0 and the maturity date. (You borrow to buy gold, sell the gold forward, and lend the gold, earning the lease rate.) c. What is the return on a cash-and-carry strategy in which gold is not loaned? (You borrow to buy gold and sell the gold forward.)
- Pele Corp. is a professional leasing company. The leasing manager has to evaluate some lease agreements under the following conditions: • The company’s marginal federal-plus-state income tax rate is 30%. • The company has alternative investment options of similar risk that yield 5.50%. Assuming all other factors and values are constant among these leases, from the lessor’s perspective, which of the following is the best lease? A lease that generates an after-tax rate of return of 2.75%. A lease that has an NPV of –$120,000. A lease that has an IRR of 3.05%. A lease that has an MIRR of 4.45%.You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner that costs $2 million and it would be depreciated straight-line to zero over a four- year period at the end of which it will be completely valueless. Assume the tax rate is 33 percent. You can borrow at 6 percent before taxes. How much would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease?ABC Inc. is considering leasing some equipment for 10 years with equal lease payments at the end of each year. The equipment would cost $200,000 to buy and would be depreciated straight-line over 10 years to a zero-salvage value. The applicable cost of debt is 10%. The lessee does not expect to owe taxes for the next 15 years while the lessor's tax rate is 21%. What is the Lessor's minimum acceptable lease payment? (Do not round your intermediate calculations. Round only your final answer to 2 decimal places, if necessary. Note: Your final answer must be in dollars without the $ sign at the beginning)
