Your investment bank has an investment of $100 million in the stock of the Swiss Roll Corporation and a short position in the stock of the Frankfurter Sausage Company. Here is the recent price history of the two stocks: Percentage price change:
Q: Which factor(s) lead to the difference of the interest between T-bill and a short-term corporate…
A: The T-bill is the debt instrument used by the government to raise capital. It has a maturity of one…
Q: Treasure Mountain International School in Park City, Utah, is a public middle school interested in…
A: The APY helps to calculate the actual interest earned on an investment over a year if the…
Q: Your sister just deposited $12,000 into an investment account. She believes that she will earn an…
A: We need to use future value formula to calculate value of deposit after 8 years Future value(FV)…
Q: (1+r)" or P = F(1+i) -n a) Find the present value of P8,000 due in four years at semi-annually b)…
A: The present value is the equivalent value today of the future money based on the time and interest…
Q: Calculate what $890 would grow to at 7.5% per year compounded daily for 6 years. (Use the Table…
A: To calculate the future value we will use the below formula Future value = PV*(1+(r/m))n*m Where…
Q: McCabe Corporation is expected to pay the following dividends over the next four years: $15, $12,…
A: The current share price can be determined using the dividend growth model which considers the…
Q: The maintenance on a machine is expected to be $155 at the end of the first year, and increasing $35…
A: Present Value = [ C1/(1+r)1 ] + [ C2/(1+r)2 ] + .....+ [ Cn/(1+r)n ] Where C1 = Cashflow for year 1…
Q: Provide one example of the following stakeholder groups possible response to risk: Employees…
A: The stakeholders are all such entities who will be impacted by operations of company and they are…
Q: The problem describes a debt to be amortized. (Round your answers to the nearest cent.) Sean Lee…
A: We will use present value of ordinary annuity formula to calculate size of quarterly payment.
Q: no. 10 only the subject is finance
A: 10. Data given: PV= Principal =$1000 Rate=9% n=68 years -20 years=48 Future value will be when r=9%…
Q: A consumer has preferences over 3 goods represented by the utility function
A: Solution: Given: u = (x1x2 )0.5 - 2-x3 MUx1 = 0.5 (x2 / x1 )0.5 MUx2 = 0.5 (x1 / x2 )0.5 MUx3 =…
Q: Bates Limited is considering investing in two capital investment projects. The expected capital…
A: This is a typical capital budgeting question. We have to find the IRR of two projects and assess…
Q: 2. Draw the cash flow for a who is person buying a car for 12 months with an initial cost of $15,000…
A: Cash flow diagram shows the cash inflows and the cash outflows with the associated time periods.
Q: Boomerang Bungee Corp. is considering the following project. Determine the equal annual annuity for…
A: We need to find the equivalent annuity. Mathematically we need to find that cash inflow that will…
Q: Discount rate Year Costs Benefits Cashflow Discount factor Present Net Value (NPV) Discounted costs…
A: Discount Rate 8% Year 0 1 2 Cost 140,000.00…
Q: An important application of compound interest involves amortized loans. Some common types of…
A: Amortization of loan means the repayment process in which the principal amount and the interest on…
Q: Suppose rRF = 4%, rM = 11%, and bi = 1.6. A. What is ri, the required rate of return on Stock i?…
A: Given,
Q: What simple interest rate should Php124,565.87 invested so that it becomes Php155,000 in 3 years? 3…
A: Simple Interest rate Maturity Value = Principal amount + Interest on Principal amount Maturity…
Q: What are the answers for the following? Construct a cost-volume-profit chart on your own paper.…
A: Cost-Volume-Profit chart Units Sales Varibale cost Fixed Cost Total Cost Profit (a) (b) = (a) *…
Q: Compute for the effective interest rate per seminannual. Nominal rate = 7.43% compounded bi-monthly
A: Nominal rate = 0.0743 Number of compounding = 6 Effective interest rate per semiannual = ?…
Q: for the below Cash flow, find the total Present value using 10% interest rate. QUESTION 2 years 0…
A: Solution:- Present value means value in today’s terms after discounting the future value. So, for a…
Q: Suppose that you are thinking about buying a car and have narrowed down your choices to two options.…
A: Here, To Find: Difference in the monthly payments between the two options =?
Q: (a) Suppose you decide to short sell some GameStop shares. Their cu rent price is $5, and you have…
A: Long position means that you think prices will go up and going short means you believe that prices…
Q: On the basis of the financial information given in this case, complete the WACC table that is…
A: The Weighted Average Cost of Capital: The weighted average cost of capital is a single, composite…
Q: Bonds from XYZ Inc. offer an after-tax YTM of 5%. They have 15 years left to mature and offer a…
A: Price of bond is present value of coupon payment +Present value of par value of bonds based yield to…
Q: If you invest $1,200 for 40 years at an 8.1% rate of return, you will have accumulated: (Keep 2…
A: Future value of a present amount With present value (PV), annual rate of return (r) and period (n),…
Q: Stephanie Carter has been gifted a sum of $50,000 by her grandparents on completing her graduation…
A: Given: Particulars Pan Elixir Rebound Cheers Think local Last year dividend $2.50 $0.50 $1.00…
Q: Beginning inventory has 100 units. ABC Company bought 400 units during the year. They sold 450…
A: 1) Ending Inventory + Sales during the year = Begining Inventory + Purchases during the year Ending…
Q: (i) Mimie borrowed $8500 from her parents to buy a ride-on mower so she could start her mowing…
A: Amount borrowed (P) = $8500 Interest rate (r) = 0.025 Period (t) = 5.5 Years Total interest paid = ?…
Q: If we were trying to compare CA deaths vs. National deaths, do we have enough data to accurately…
A: Trend measures the increase/ decrease in value over a period. It is calculated as shown below.…
Q: Compute the total present value of dividends for National Co. as of the beginning of Year +1.…
A: Dividend discount model Under dividend discount model, the present value of all future dividends…
Q: You deposit 500 in an account on January 1, 2003. Interest is credited each year on December 31, at…
A: The amount of money that we deposit in banks earn interest. Usually the banks pay interest at a flat…
Q: App1 is a company that has a patent right for a new mobile technology that is expected to enable it…
A: Share Price is the sum of all cashflows discounted at a certian discount rate Share Price =…
Q: Suppose you are the money manager of a $3.82 million investment fund. The fund consists of four…
A: Solution:- Capital Asset Pricing Model (CAPM) is a model which gives a formula to calculate the…
Q: Ms. Brown purchases a house for $300,000. She borrows $200,000 from a mortgage company at the rate…
A: In a leveraged sale purchase transaction of a house, we have to find the average annual rate of…
Q: 8. Given that Stephanie’s bank offers an interest rate of 6% per year, what additional amount…
A: Given: Particulars Pan Elixir Rebound Cheers Think local Last year dividend $2.50 $0.50 $1.00…
Q: te the required rate of return for Mudd Enterprises assuming that investors expect a 4.3% rate of…
A: Required rate of return depends on risk of the stock that is given by the beta of stock and it also…
Q: Question 8 How much is the proceeds if Marl Php22,735 at 2.85% for 2 years and 5 m Php21,169.13
A: Simple interest is simple and there is no compounding of that means there is no interest on interest…
Q: This morning a corporate bond of Carnival Corp Inc was being traded at par of $1,000. By midday, the…
A: To calculate the bond price we will use the below formula Bond price = FV/(1+r)n Where FV - Face…
Q: Melvin Indecision has difficulty deciding whether to put his savings in Mystic Bank or Four Rivers…
A: The compound interest adds the interest earned in a period to the principal because of which more…
Q: You've collected the following information from your favorite financial website. 52-Week Price Lo…
A: Dividend Growth Model: a strategy based on the belief that dividend growth will always be in…
Q: Carpet Baggers Inc. is proposing to construct a new bagging plant in a country in Europe. The two…
A: The IRR is used to measure the profitability of a project. It provides the maximum return for which…
Q: Use the Excel NPV() function to calculate the maximum loan you would be willing to give today for a…
A: Annual payment = $18,000 Interest rate = 10%
Q: The contract for the purchase of a R50 000 factory calls for a cash payment of R15 000. The balance,…
A: Given: The cost of the factory is R50,000 and the down payment amount is R15,000. The payment are…
Q: Marginal Incorporated (MI) has determined that its after-tax cost of debt is 9.0%. Its cost of…
A: A firm will have to switch from the internal accruals to external equity if the internal accruals…
Q: QUESTION Briefly differentiate between money market and capital market in relation to: i. risk…
A: The overall financial market can be divided into money market and capital market. Both these…
Q: Five Star Corporation will pay a dividend of $2.50 per share next year. The company pledges to…
A: Next dividend (D1) = $2.50 Growth rate (g) = 0.03 Required return (r) = 0.10 Stock Price = ? We…
Q: A firm's stock has a market capitalization of 520 million and an equity beta of 1.05. Bonds issued…
A: The capital asset pricing model is a tool used in finance to estimate an asset's necessary rate of…
Q: A Treasury bill has a bid yield of 2.79 and an ask yield of 2.77. The bill matures in 175 days.…
A: Here, Bid yield = 2.79% Ask yield = 2.77% Maturity period = 175 days Face value = $1,000 To Find:…
Q: You have a chance to buy an annuity that pays $25,000 at the beginning of each year for 10 years.…
A: Here the payments are being made at the beginning of each year. Hence this is the case of an annuity…
Your investment bank has an investment of $100 million in the stock of the Swiss Roll Corporation and a short position in the stock of the Frankfurter Sausage Company. Here is the recent price history of the two stocks:
Percentage price change:
Month |
Frankfurter Sausage |
Swiss Roll |
January |
-10% |
-10% |
February |
-10% |
-5% |
March |
-10% |
0% |
April |
10% |
0% |
May |
10% |
5% |
June |
10% |
10% |
- Using the evidence from these six months, how large would your short position in Frankfurter Sausage need to be to hedge as far as possible against movements in the price of Swiss Roll? Please explain to detail on your excel spreadsheet. Thank you
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- Under peso-cost averaging, an investor will purchase P6,000 worth of stock each year for three years. The stock price is P40 in year 1, P30 in year 2 and P48 in year 3. A. What is the share purchased in every year? B. Compute the average price per share. C. Compute the average cost per share.Newdeal Inc. follows a policy of distributing 45% of its profits and investing the rest in the operations of thecompany. The average profitability of its assets is 20% and the current year dividend per face value of 1₺ is30%. Compute the intrinsic value of a stock of this company for an investor whose minimum required rate ofreturn is 25%.b) Compute the value of this stock one year later under the same assumptions.You have 100 million dollars in your investment account and choose to keep your money allocated in the following proportion and rebalance each quarter. i. 60% in stocks via ETF SPY ii. 35% in bonds via ETF TLT iii. 5% in cash Over the month of september , SPYwent from $452 to $429, and TLT went from $149 per share to $144 per share. Cash has an interest rate of 0.1% annually. a) What is your overall account $ balance before rebalancing? What proportions of that is in SPY, TLT, and cash respectively? b) How do you rebalance your account to keep the allocation at 60-35-5 for SPY TLT and cash respectively? What to buy and what to selll in dollar amount?
- Under peso-cost averaging, an investor will purchase P26,500 worth of stock each year for 5 years. The stock price is P40 in year 1, and is 5% increasing for the next 3 years except for the 5th year that the stock price decreases by 10%. A. What is the share purchased in every year? B. Compute the average price per share. C. Compute the average cost per sharea) Newdeal Inc. follows a policy of distributing 45% of its profits and investing the rest in the operations of the company. The average profitability of its assets is 20% and the current year dividend per face value of 1₺ is 30%. Compute the intrinsic value of a stock of this company for an investor whose minimum required rate of return is 25%. b) Compute the value of this stock one year later under the same assumptions.A company has just paid an ordinary share dividend of 32 cents and expected to pay a dividend of 33.6 cents in one year’s time. The company has a cost of equity of 13%. What is the market price of the company’s shares to the nearest cent on an ex dividend basis? $3.20 $4.41 $2.59 $4.20 Use the following information to answer questions 18 and 19 Bill plans to open a service centre. The equipment will cost $50,000. Bill expects the after-tax cash inflows to be $15,000 annually for 8 years, after which he plans to scrap the equipment and retire. What is the project’s regular payback period? 2.67 years 3.33 years 3.67 years 4.33 years Assume the required return is 10%. What is the project’s discounted payback period? 4.25 years 5.25 years 6 years the project does not payback on discounted basis.
- If the discount rate is 9%, what is the present value of 5375 USD received at the end of each year for 12 years?a) 25000,375b) 10000,5c) 12450,5d) 15500,375e) 38490,375 ============== The price / earnings ratio of the beta company stock has been calculated as 7.4. If the expected earnings per share of this stock for the next year is 2.5 USD, what is the real value of the stock? If the stock of this company is currently trading at 25 USD, can the relevant stock be purchased? a) 18.5 and should not be boughtb) 36 and must be purchasedc)45 and must be purchased d) 18.5 and must be purchasede) 40 and should not be boughtConsolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 2.7 million shares that are outstanding. Shareholders required a 10 % rate of return on consolidated stock. A. What is the price of Consolidated stock? B. What is the total market value of its equity? Consolidated now decides to increase next year’s dividends to $20 a share, without changing its investment or borrowing plans. Thereafter, the company will revert to its policy of distributing $10 per year. C. How much new equity capital will the company need to raise to finance the extra dividend payment (enter answer in millions). D. What will be the total present value of dividends paid each year on the new shares that the company will need to issue (answer in millions)? E. what will be the transfer of value from old shareholder to new shareholder (answer in million)?National Corporation shares are selling for P50. Earnings for the last 12 months were P3 per share. The average trailing P/E ratio for firms in National Corporation’s industry is 30 times (based on the last 12 mos. EPS). If we assume that National Corporation.’s stock should trade at about the same P/E with it’s industry, what will we estimate as an appropriate price for National Corporation’s stock?
- You are very optimistic about the personal computer industry, so you buy 200 shares of Microtech Inc. at $45 per share. You are very pessimistic about the machine tool industry, so you sell short 300 shares of King Tools Corporation at $55. Each transaction requires a 40 percent margin balance. a. What is the initial equity in your account? b. Assume the price of each stock is as follows for the next three months (month-end). Compute the equity balance in your account for each month: Month Microtech Inc. King Tools Corp. October $51 $48 November 39 62 December 37 40Eight months ago, you purchased 400 shares of AAA stock for $46.40 a Share. The company pays quarterly dividends of $1.05 a share. Today, you sold all of Your shares are for $48.30 a share. What is your total percentage return on this Investment? What is your total dollar return on this investment? Briefly discuss.Catapult Company has a current book value of $35 per share. As the result of an innovative product, the company earned an ROE of 14 percent. An analyst studying Catapult has estimated that the 14 percent ROE will continue for the next three years. At that point, he is uncertain what will happen to ROE, but he does observe that prior to last year, the share price was at a persistent 10 percent premium over book value, and he assumes this will be the case at the end of his three-year forecast. However, management has maintained an average market value over book value of 30 percent. The firm has a dividend payout ratio of 30 percent and the analyst estimates the cost of equity to be 10.2 percent. The intrinsic value per share for Catapult that the analyst will calculate is closest to: A. $49.00 B. $47.00 C. $50.00