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: 1. John approached you with a business proposition to invest in a project. The Annual Cash Flows…
A: Cash flows are the cash generated from the operation of the business organisation. In other words,…
Q: You are preparing to produce some goods for sale You will sell them in one year and you will incur…
A: For calculation of sell price we will use time value of money concept where future value of the…
Q: True or False. 1. Personal financial activities may fall into spending, saving or sharing…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: a) Let's say you invest $10,000 into each account. What is the final amount after 10 years? b) How…
A: Future Value: It represents the future worth of the present amount and is estimated by compounding…
Q: What is the variance of returns for Security ABC
A: In finance we use variance of returns as a measure of risk that is inherent in a stock or a…
Q: A trust fund is to be formed by depositing ₱4,000 every six months for 25 years in a bank that…
A: Semi-annual deposit - 4000 Time period - 25 years Amount at maturity - 300,000 Formula for…
Q: The company DstriBut.inc decides to take a technological shift by replacing its old distribution…
A: NPV NPV is a capital budgeting tool to decide on whether the capital project should be accepted or…
Q: Which of the following is not an assumption made by Modigliani and Miller in relation to the…
A: The question is related to theories of Capital Structure. As per MM Approach, a change in…
Q: percent. Compute the firm's weighted average cost of capital based on the following information.
A: WACC: WACC also known as the company's average cost of capital. It is the sum of individual cost of…
Q: According to Modigliani and Miller, what happens to the cost of equity when the firm increases its…
A: Equity financing is the process of raising money from the investors and give ownership to the equity…
Q: Distinguish between the activities of retail and investment banks and discuss how this has an impact…
A: Retail banks and investment banks serve distinct clients and fulfill different responsibilities.…
Q: A firm has sales of $1,070, net income of $211, net fixed assets of $514, and current assets of…
A: The common-size balance sheet financial statements are the statements that show the company's…
Q: What is the portfolio beta?
A: Portfolio beta = (W1*B1) + (W2*B2) + (W3*B3) Where W1 = Weight of stock 1 W2 = Weight of stock 2 W3…
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: Suppose we want to compute the four-quarter moving average of Company ABC’s sales as of the…
A: In finance we often use the concept of moving averages to predict and forecast sales of future…
Q: Personal financial planning is the process of managing other people's money to achieve economic…
A: As per Bartleby guidelines, If multiple questions are posted, only the first 1 question will be…
Q: True or False.
A: Financial goals help people save money at the time of retirement. It includes the Specific,…
Q: [The following information applies to the questions displayed below.] Allison, Keesha, and Steven…
A: A partnership is a legally binding agreement between two or more persons to manage and run a…
Q: The Nunal Corporation finds that it is necessary to determine its marginal cost of capital. Nunal’s…
A: The Weighted Average Cost of Capital (WACC) refers to the financial ratio that calculates the…
Q: D. Conaider E CRA)= 20%0 E CRe) : 30% a port folio of 2 risk = 10% 8:20% assets A &B where =0:4 A,B…
A: Solution:- Minimum Variance Portfolio is that portfolio in which the weights of securities are such…
Q: Suppose that you have a plan to pay RO 0592 as an annuity at the end of n month for 20 years in the…
A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…
Q: 3) What three things are required to make revenue management work AND why?
A: Revenue management is referred as the disciplined analytics application, which helps in prediction…
Q: 1. 3. Envestment required Present value of cash inflows at a $(560,000) $(510,000) $(410,000) $(350…
A: Profitability index is the ratio of present value of cash flow to the initial investment and it must…
Q: Explain why traditional banking has been on the decline in recent years.
A: Traditional banking refers to banks that have a physical presence and are licensed to operate in the…
Q: A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm…
A: Earnings before interest and taxes: Earnings before interest, depreciation and taxes are the…
Q: Smart Company is expecting temporary idle cash. Hence, it is considering investing in marketable…
A: Here, Per Transaction Cost id P10 Interest Rate is 6% Cash Payment is P12,000,000 monthly
Q: 1. What is the (inflation-adjusted) dollar coupon interest that will be paid in cash at the end of…
A: Time value of money (TVM) is used to measure the value of money at different point of time in the…
Q: 5. What is the Capitalized Worth, when i= 10% per year, of $3000 per year, startıng in one yea…
A: Capitalized cost of a project can be defined as the present value of all costs that will be incurred…
Q: ment costs ₱3046114 with the estimated salvage value of ₱696261 at the end of 6 years. What is the…
A: Depreciation can be found by the sinking fund method also considering as the future value required…
Q: 4.18 The Punch Bowl Corp. produces and sells two products, P and B. In prior year, Punch Bowl has…
A: In the case of multiple products being sold, we compute the break-even point for the company…
Q: TABLE 1: Net cash flows for three projects Project Omicron Project Upsilon Project Omega Year -10000…
A: Mutually Exclusive Projects: They are capital tasks which contend straightforwardly with one another…
Q: True or False. 1. Financial goals can be classified as to timing and purpose. 2. Consumable-product…
A: Financial goals- are the target i.e., saving target, spending target , investment target, etc., set…
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: average life time value ot
A: The average lifetime value is to be calculated by multiplying the average order with the average…
Q: Explain liquidity risk and credit risk faced by banks and discuss how banks manage these risks
A: Liquidity risk It is characterized as the risk of bringing about misfortunes coming about because of…
Q: Which of these would NOT contribute to a retailer's use of forward buy? O A. Low holding costs O B.…
A: Forward buying - When a buyer negotiates the purchase of a commodity at current price i.e., today's…
Q: aving a trading system is important? And why managing our
A: Trading system is very important for growth and development of economy and growth of financial…
Q: 13. Explain what is meant by basis risk in the situation where a company knows it will be…
A: The financial risk that offsetting investments in a hedging strategy may not suffer price movements…
Q: Jamie turned 50 years old today. She has just contributed $2,000 to a retirement savings account ar…
A: As the amount is being deposited into the retirement account money grow with time and interest rate…
Q: ARCABE Enterprises is trying to select the best investment from among four alternatives. Each…
A: Here, Discount Rate = 10% To Find: a) Discounted payback period =? b) Net present value =? c)…
Q: A. Messi wishes to find the present value of $ 3,500 that will be received 12 years from now. Messi…
A: Hi! Thank you for the question, As per the Honor Code, we are allowed to answer one question in case…
Q: Formulate the model on a spread and solve using Solver. Give the following: i. Objective function:…
A: NPV stands for net present value. It is one of the often used capital budgeting tool that companies…
Q: Identify the following interest rates as nominal or effective: (ABET, SO1) A: 1%= 6% per semiannual,…
A: Effective rate is the rate of return for particular period. Say 1 month, 1 year and compounded 1…
Q: Which of the following rebalancing methodologies will ha market impact cost? Buy and Hold Momentum…
A: Rebalancing a portfolio It is a process by which the weights of the assets of a portfolio are…
Q: Determine the IRR
A: IRR is the discount rate where NPV of the cashflows calculated using IRR will be Zeera, which means…
Q: O puts; 625 contracts.
A: Hedge refers to the risk management strategy employed to cover the loss in investments by opting for…
Q: interest rate risk differs between mortgage companies and other financial institutions
A: The mortgage company is a financial firm that gives out its own loans. They use their own funds or…
Q: What is the present value of a perpetuity stream of cash flows that pays P1,000 at the end of year…
A: present value of a perpetuity stream of cash flows = cash flows at end of year 1/(Discount rate -…
Q: You own $35000 from the bank for 3 years at 8.50% annual interest, and you will make equal monthly…
A: Solved using Financial Calculator PV = 35,000 N = 3years * 12 = 36 I/Y = 8.5/12 = 0.708333 CPT PMT…
Q: 1. Find the ordinary interest and exact interest of the given data: A Php15,000 loan at 21% p.a made…
A: Interest refers to the amount paid by the borrower to bank on the amount borrowed at a fixed or…
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?
(Format: XX.XX%)
Step by step
Solved in 3 steps
- 1. The return over the risk free rate of 3.4% A. Real return B. Average return C. Risk premium D. Required return E. Inflation premiumWhat is the market risk premium (rM - rRF)? Format: 1.1%The following data are gathered for: · The real risk-free rate is 1.25% · Inflation premium is constant at 2.50% · Default risk premium is 5% · Liquidity risk premium is 0.50% What is the quoted rate on a short-term government security? (Format: X.XX%)
- Using Excel Formula to find interest rate "i" based on the following problem statement: n=PMT= Pv= Fv=|i=??? 0 -500 1 50 2 100 3 150 4 250 5 500 250Define each of the following terms:k. Inflation premium (IP); default risk premium (DRP); liquidity; liquiditypremium (LP)The following data are gathered for:· The real risk-free rate is 1.25%· Inflation premium is constant at 2.50%· Default risk premium is 5%· Liquidity risk premium is 0.50% What is the quoted rate on a short-term government security?
- The actual interest paid or earned is commonly referred to as the: a. Risk premium. b. Annual effective interest rate. c. Nominal interest rate. d. Real rate of return.8. Given the following information what must be the risk-free rate of interest (assume the asset is properly priced)? The expected return of the market is 14.25%, the stock's B is.82 and the expected return of the asset is 12.89%. A.5.91% B. 6.69% C. 7.41% D. 8.93%Capital Asset Pricing Model (CAPM) - Risk Free rate Risk free rate (Rf)* Beta (B)* 1.10 Market risk premium* 7.00% Expected return (ER) 10.20%
- which one is correct please confirm? QUESTION 27 The term structure of interest rates is related to the ____ risk premium. a. seniority b. marketability c. default d. maturityCalculate a security’s default risk premium where the equilibrium rate of return is 8 percent, the inflation risk premium is 1.25 percent, the real risk-free rate is 3.5 percent, the liquidity risk premium is 0.35 percent, and the maturity risk premium is 0.95 percent and there are no special covenants.The market interest rate is 12%, risk-free rate is 5% and inflation rate is 3%. What is the exact real rate of return as per Fisher's effect equation and real risk premium for the market? a. Real rate of return is 6.67%, risk premium for the market is 3.67%. b. Real rate of return is 9.00%, risk premium for the market is 4.00%. c. Real rate of return is 8.74%, risk premium for the market is 3.74%. d. Real rate of return is 7.00%, risk premium for the market is 2.00%.