The following data are gathered: ·       The real risk-free rate is 1.05% ·       Inflation premium is constant at 2.60% ·       Default risk premium is 3.50% ·       Maturity risk premium is 2.30% ·       Liquidity risk premium is 1.50% What is the risk free rate?

Q: A firm has a debt-to-equity ratio of 0.50. Its cost of debt is 12%. Its overall cost of capital is…

A: To calculate the cost of equity we will use WACC formula as follows:   WACC = [Ke*E]+[Kd*D] Where…

Q: A horizontal merger takes place between companies operating: a. At different stages of the…

A: Solution: When two or more entities start working by coming together, it is called a merger. There…

Q: From the following information calculate the Net Present Value of the two projects & suggest which…

A: Investment appraisal deals with evaluating potential projects of a company. It involves comparing…

Q: National Company expects P30,000,00 in earnings next year. Its dividend payout ratio is 40%, and its…

A: Expected earnings = P30,000,000 Dividend payout ratio = 40% Equity to asset ratio = 40%

Q: A firm has issued P1,000 bonds with a 10-year maturity and a face value of P1,000,000. Quarterly…

A: Face value of the bond = P1,000 Quarterly maturity period (n) = 40 (i.e. 10 years * 4) Quarterly…

Q: At the start of every year Jane puts $100 into an investment that gets 5% interest at the end of the…

A: According to the requirement, question (b) is solved.

Q: Pedro buys a condo for $629,000, with a down payment of $40,000. He takes out a 30-year mortgage for…

A: Loan amount (P) = $589,000 Monthly interest rate (r) = 0.0025 (i.e. 0.03 / 12) Monthly period of…

Q: Your cousin is currently 13 years old. She will be going to college in 5 years. Your aunt and uncle…

A: Given,  Amount required at the end of year 5 = 115,000 Interest = 3.6% per annum  Time period = 5…

Q: In one year: Firm XYZ will earn $90 if its businesses perform well. The Firm owes a $60 payment to…

A: Data given: If business performs well : payment due to creditors= $60 (Chance 50%) If business…

Q: Vhat is the marketspace?

A: Marketspace is an virtual market that allows third parties to sell their merchandise. Technology…

Q: Hail & Sons operates for 240 days in a year. It has been offered credit terms of 4/30, net 90

A: Cost of non free credit would be the cost of discount given to the customer for doing early payment.

Q: LExplain what happens to the bond price and interest rate and why. i) i1) ii1) Expected inflation…

A: A bond's price is the present discounted value of its future cash flow. It denotes the total of the…

Q: Why is it important to prepare a financial budget? Explain what is meant by the term "time value of…

A: Financial statements are written documents that generally tells any company's various records or in…

Q: eristics?

A: Step 1   Risk is defined as an occurrence that harms financial performance and/or reputation as a…

Q: Determine the PW (Present Worth) at 7% of the given cash-flow diagram. Use MS Excel

A: Here, Discount Rate is 7%

Q: What is the effective rate for an interest rate of 12% compounded continuously?

A: Effective Annual Rate: The effective annual rate of interest is the actual or the real rate of…

Q: Which of the following statements is true about broker markets? Group of answer choices Brokers…

A: In broker markets, brokers does the trade on behalf of their clients. Brokers do not have right to…

Q: In the purchase of a rice cooker, a buyer pays P 200 cash, and he will discharge the balance,…

A: Cash price of the rice cooker will be equal to the sum of down payment of P200 and present value of…

Q: A recent college graduate hopes to have 200,000 saved in their retirement account 25 years from now…

A: Here, Future value (FV) = 200,000 Number of years = 25 years Contribution per month = 150 Interest…

Q: Debt Management Ratio's Trina's Trikes Inc reported a debt to equity ratio of 1.91 times at the end…

A: Debt to equity ratio = 1.91 Total debt = $10,900,000 Total equity = ?   Debt to equity ratio means…

Q: funde and exchange traded funds (ETES) is that:

A: A person looking to make investments in stocks and securities can consider different investment…

Q: average life time value ot

A: The average lifetime value is to be calculated by multiplying the average order with the average…

Q: It is likely that airplane tickets will increase 5% in each of the next 5 years. The cost of a plane…

A: Data given: Cost of a plane ticket at the end of the first year = ₱10720. Increase in airplane…

Q: Which one of the following correctly states a purpose of the generation-skipping transfer tax…

A: GSTT is a federal tax. This tax comes into picture when there is a transfer of property to a…

Q: A project has an initial cost of $50 000, net annual cash inflows of $20 000, and a $2 000 salvage…

A: Rate of return is the return on the profit on investment, It can change the value of investment,…

Q: b. Financial Management means planning, organizing, directing and controlling the financial…

A: Risk management refers to the process of identifying, analysing, and accepting or mitigating risk in…

Q: What are the ways in which a bank can increase its capital adequacy ratio?

A: Capital Adequacy Ratio or CAR is referred as the measure through the capital for the bank that are…

Q: can i get  solution with manual formula that i can apply through using my calculator

A: We will use the concept of time value of money here. As per the concept of time value of money the…

Q: Which one of the following statements is correct?

A: Efficient Market Hypothesis: It states that the financial markets are efficient informationally.…

Q: Mark buys a 10-year bond of face (and redemption) amount of $1000, with 10% annual coupons at a…

A: Here, To Find: Yield earned on the investment =?

Q: Question 1 Living Colour Co. has a project available with the following cash flows: Year Cash Flow…

A: Year Cash flow 0 -$34,430 1 $8,090 2 $9,730 3 $13,840 4 $15,770 5 $10,580   Required…

Q: A 1-year short-term corporate bond yields 8.50%. The stated rate for the short-term government…

A: Bond yield refers to the total return to the investors by investing in bonds. Bond yield reflects…

Q: ective rate of interest on an investment is 5.52%, what is the nominal rate of interes nded monthly?

A: Solution:- Effective rate of interest means the net interest rate for the year after effect of all…

Q: D. Consider E CRA): 20%. E CRe) : 30% a port folio of 2 risky assets A & B where =10% 9:20%% =0:4…

A: Solution:- Minimum Variance Portfolio is that portfolio in which the weights of securities are such…

Q: years. Manually calculate the compounded amount and the compounded interest of Aaron's investment.

A: Compound Interest: It is the interest on the investment or loan computed based on the initial…

Q: Alfredo wants to know how much he must put in a bank account today to have within 14 years an amount…

A: Here, To Find: Part A. Conversion rate to current dollar =? Part B. Present value of investment…

Q: The Tech company. Inc. is currently making windfall profits from the sales of financial programming…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: following table shows the nominal returns on Brazilian stocks and the rate of inflation.    Year…

A: Nominal Interest rate = Real Interest rate + Inflation Real Interest rate = Nominal Interest rate -…

Q: Solve manually using formulas. Xia received an HMO card which allows her to reimburse all of her…

A: The future value is used to measure how much money an account will hold after certain deposits have…

Q: A company purchases an asset for P10,000 and plans to keep it for 20 years. If the salvage value is…

A: Depreciation: A depreciation is a non-cash expenses for the company. The depreciation expenses is…

Q: All of the following are the steps to figure out "The Rule of 72" EXCEPT Find the interest rate. O…

A: The General Financial Rules (GFRs) are a collection of rules and orders issued by the Indian…

Q: Austin is going on holiday with his infant daughter and has a first class air ticket. He values…

A: A negotiation is a proactive dialogue that addresses a problem in a way that is agreeable to both…

Q: On April 1, 2022, Pink Company signed an agreement to operate as a franchisee for a franchise fee of…

A: Data given: Initial payment =P 2,000,000 Balance payable in  six (6) semi annual payment  = P…

Q: (TRUE/FALSE) You own 200 shares of Nestle and 100 shares of Quaker.  Your portfolio return is…

A: Portfolio is collection of financial assets and instruments that are held by an individual investor.…

Q: The interest rate is 5% per year. Year Cash flow, $ 150 150 + G 150+2G Year 4 5. Cash flow, $ 150+3G…

A: The present value of both cash flow must be equivalent to each other considering the time and…

Q: (3) What are the basic steps in risk manaqement? Briefly describe each.

A: In finance we make investments and manage our money with the objective of generating a return.…

Q: A bond with a price today of $900 is said to: A) Sell at Par, B) Be a zero coupon bond, C) be a…

A: Bond: It is a debt instrument issued to raise debt capital by the company (issuer). The bond…

Q: Which of the following correctly describe a role played by a member of the estate planning team?…

A: Solution:- Estate planning means all the procedure to sell assets of a person in event of his death.

Q: what is the Total Asset Turnover Ratio for pepsi company for year 2019, 2020, 2021?

A: The Total Asset Turnover Ratio measures the average number of times the sales over the total asset.

Q: Fun Tyne plc declares a dividend payment of 20p per share. Ignoring taxes and the time value  of…

A: Solution:- In efficient markets, the price of a security reflects immediate effect of all the…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.