The return on the market portfolio is currently 13%. Bato Gan Corp.Stockholders requires a rate of return of 21%, and the stock has a beta of 3.5. Using CAPM, determine the risk-free rate.

Q: A project will require an initial outlay of $2000 and will result in the following cash inflows in…

A: capital budgeting can be a useful tool for investors to evaluate the investment opportunities…

Q: Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently…

A: Here, Current Quoted Price is 125-100 Face Value of Future is $100,000 Interest Rate will go down in…

Q: Consider a bond that is currently priced at $1100. If the face value of the bond is $1000, coupon…

A: Bond refers to the debt securities which are issued by the government or corporation for raising the…

Q: If the value of sustainable investing is $171.1 and the discount rate is 8% while the value of…

A: Expected value will be calculated using formula :   Expected Value = Probability of    × present…

Q: All else held the same, an increase in time to maturity will cause an increase in the value of a…

A: The price of a bond is the PV of future coupons and par value discounted at the YTM (yield). The…

Q: The real risk-free rate of interest is 4 percent. Inflation is expected to be 2 percent this coming…

A: The real risk free rate refers to the return provided by a security with zero volatility and…

Q: An electric motor has a cash price of Php 8000. It can also be bought on installment basis with down…

A: Lease Installment is that amount which is paid by the lessor to lessee at fix time period. It…

Q: Starting three months after her grandson Robin's birth, Mrs. Devin made deposits of $105 into a…

A: Mrs. Devin Compound = quarterly = 4 time = Dt = 18 * 4 = 72 quarters quarterly deposits = Dp = $105…

Q: 1. Your company issue the common shares of Cnd$50/share, 2 million shares outstanding; Your company…

A: The weighted average cost of capital is used to assess the feasibility of projects. Weighted average…

Q: A stock price is currently $80. At the end of four months it will be either $75 or $85. The…

A: The holder may sell the underlying asset when a European put option expires. A put option holder…

Q: Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 9% coupon rate,…

A:

Q: A stock has an required return of 18 percent, its beta is 02.25, and the risk-free rate is 2.75…

A: Expected return on the market is calculated using following equation Required rate of return on…

Q: Esfandairi Enterprises is considering a new three-year expansion project that requires an initial…

A: Sales = $2,860,000 Costs = $1,850,000 Depreciation = $2,350,000 / 3 = $783,333 Tax rate 25 percent…

Q: You have 3 projects with the following cash flows: Year 0 1 Project 1 Project 2 Project 3 -150 -825…

A: Internal rate of return and net present value are the modern methods of capital budgeting that are…

Q: b. C. What are the company's capital structure weights on a book value basis? (Do not round…

A: First we need to determine the book value and market value of each source of capital.  Book value…

Q: 2. What is the major difference in the obligation of one with a long position in a futures (or…

A: The main difference between a futures (or forward) contract and an options contract is that a buyer…

Q: London Motors sells a $20,000 car for $470 per month for 48 months. What is the interest rate? 6.54…

A: An interest rate is the percentage at which a borrower is charged for borrowing money from a lender,…

Q: You have just completed a $20,000 feasibility study for a new coffee shop in some retail space you…

A: The initial cash flow of a project refers to the amount of cash that will be invested or required to…

Q: You have just negotiated a home mortgage with a principal of $350,000. The bank's quoted rate is…

A: Principal, interest, taxes, and insurance are the usual four components of a mortgage payment. The…

Q: A Cash-flow matching portfolio consists of 500 1-y zero coupon bonds, 1000 2-y 5% bonds What are the…

A: Let the face value of each bond be €100 So, number of zero coupon bonds = 500 Number of coupon bonds…

Q: A par bond has a yield to maturity of 5.8% and pays coupons semi-annually.  What is the coupon…

A: The coupon rate are fixed payment that are done to bond holders . As these are investment for the…

Q: What will a $110,000 house cost 8 years from now if the price appreciation for homes over that…

A: Future Value is that value which is calculated with the help of present value and interest rate/…

Q: A power option pays off [max(S₁ – X),0]² at time T where ST is the stock price at time T and X is…

A: To calculate the risk-neutral probability, we can use the fact that the price of the power option is…

Q: Find the present value and the amount of the annuity at the specified interest rate;  Php 200…

A: An annuity is a type of security that pays a periodic sum over a specific period of time. An annuity…

Q: 1. Financial institutions in the U.S. economy Suppose Clinton decides to use $3,500 currently held…

A: There are different methods for firms to raise funds from the market. It can be done by selling…

Q: Comment the CAPM result of Apple over 2022 and 2021

A: The cost of equity is the return that the owners of the company expect. The cost of equity is…

Q: 39: Using the following closing prices and dividends compute the CWI (cumulative wealth index), the…

A: To compute the CWI, CPC, and CDY, we need to use the following formulas: CWI(t) = CWI(t-1) * (1 +…

Q: FCF and NPV for a project: Archer Daniels Midland Company is considering buying a new farm that it…

A: NPV NPV stands for Net Present Value. The amount of time until a cash flow is expected determines…

Q: Suppose a stock had an initial price of $44 per share, paid a dividend of $5 per share during the…

A: To calculate the percentage total return we will use the below formula   Percentage total return =…

Q: You saved $10,943.89 in an emergency fund. One fourth is in a regular savings account at a 3.5% APR,…

A: The CD is a savings instrument provided by financial institutions. The CD provides the holder with…

Q: You put half of your money in a stock that has an expected return of 14% and a standard deviation of…

A: The standard deviation of a portfolio is a measure of the total risk of the portfolio, which takes…

Q: Ms. Delatorre mentioned that she purchased a stock one year ago for $250 per share, and that the…

A: Rate of return is a measure of the profit or loss on an investment, expressed as a percentage of the…

Q: machine that is expected to be obsolete in 5 years. The machine is worth P104703. The prevailing…

A: To determine whether the company should buy the machine or not, we need to calculate the present…

Q: Suppose that you have the following two opportunities from which to construct a complete portfolio:…

A: A portfolio is a combination of various securities which consists of common stock, bonds, debt…

Q: Assuming all other variables stay the same, an increase in accounts payable would cause cash flow…

A: Accounts payable is one of the current liability being incurred in business. It means goods and…

Q: Before-tax cost of debt and after-tax cost of debt David Abbot is buying a new house, and he is…

A: a. We need to use the following formula in excel to calculate before tax interest rate  Before tax…

Q: Suppose the yield on a bond that pays $100 in one year is currently 2%. If interest rates suddenly…

A: The price of bond and   rate are inversely related i.e., if interest rates rises, price of bond will…

Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 million and…

A: OpenSeas Inc is evaluating the purchase of new cruise ship . The Ship cost $499 Million and will…

Q: The market risk premium is 11.5 percent, and the risk-free rate of return is 3.75 percent. Assuming…

A: Market risk premium = mrp = 11.5% Risk free rate of return = rf = 3.75% Expected return = R = 13.5%

Q: A contract requires end-of-month payments of $175 for another 8 1/4 years. What would an investor…

A: It is a case of the present value of the monthly annuity to be paid for the contract. It has a…

Q: Which of the following is a consequence of inflation a. An increase in economic growth b. An…

A: Inflation defines the changes made in the rising price of goods or services in a certain period of…

Q: QUESTION 1: A construction company agreed to lease payments of ​$452.56 on construction equipment to…

A: Lease is kind of agreement in which there are periodic payments for lease and there is right to use…

Q: You own a coal mining company and are considering opening a new mine. The mine will cost $120…

A: Net present value and internal rate of return are the methods of capital budgeting that are used to…

Q: You currently own 2,000 shares of Industrial Industries stock. You purchase the stock for $128.34…

A: Holding period return on stock is calculated below Holding period return = P1-P0+D1P0 Where, P1 is…

Q: You and your grandma are both deciding what bond to buy: -A U.S. treasury bond that has an 8% yield…

A: It is a problem that requires calculating the tax-equivalent yield for both bonds. Afterward, the…

Q: 5. Given an optimal capital structure that is 50% debt and 50% common stock, calculate the weighted…

A: Weighted average cost of capital is also known as WACC. It includes the all cost which is incurred…

Q: igour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever…

A: Yield To Maturity: It represents the expected rate on the bond by the bondholder if all the coupon…

Q: Referring CFA Standards of Professional Conduct I(A): Knowledge of the Law, which of the following…

A: The CFA Standards of Professional Conduct I(A): Knowledge of the Law emphasizes the importance of…

Q: QUESTION 4 You buy a $1000-par 6.5% annual coupon bond for $915 and sell it 4 years later for $940.…

A: HPR stand for Holding period return. It is the difference between in price means purchase price and…

Q: Ling has saved $73,000.00. If she decides to withdraw $2,828.00 at the beginning of every year and…

A: The present value of an annuity is the current worth of a series of cash flows at a certain rate of…