Difference between systematic and unsystematic risk
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Answer the following questions:
- Difference between systematic and unsystematic risk
- Risk free return= 10%, Market return= 14% beta value=1.5, calculate the required return of asset by using
CAPM . - Residual theory of dividend with example
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- - Consider demand: x(p₁) = 400 — 2p1 At a market price of p₁ = $125 per unit: • Determine the social loss due to moral hazard when assuming: 1. Full insurance compared to uninsured 2. A co-payment of $50 compared to uninsured 3. A 75% coinsurance rate compared to uninsuredBooher Book Stores has a beta of 0.9. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 8%. The market risk premium is 6.5%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places. ________%5. Consider a 2-year CDS. Assume the conditional default probability is 9% in year 1 and 11% in year 2. Calculate the present value of the expected CDS payout per $1 of notional principal. Assume a 4% riskfree rate and 20% recovery given default.
- Suppose you are 45 and have a $410,000 face amount, 15-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $1,435. The cash value of the policy is expected to be $16,400 in 15 years. Using time value of money and assuming you could invest your money elsewhere for a 7 percent annual yield, calculate the net cost of insurance. Use (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D)Please answer along with the excel formulas - 1. Sue now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding? $205.83 $216.67 $228.07 $240.08 $252.08 2. Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures? $1,781.53 $1,870.61 $1,964.14 $2,062.34 $2,165.46 3. Last year Rocco Corporation's sales were $225 million. If sales grow at 6% per year, how large (in millions) will they be 5 years later? $271.74 $286.05 $301.10 $316.16 $331.96Scenario Your corporation has just approved an 8-year expansion plan to grow its market share. The plan requires an influx of cash in each of the 8 years. Management wants to develop a financial plan to ensure the cash needed for the expansion will be available at the beginning of each of the 8 years. The corporation has the following investment options: Security Price per unit Return Rate (%) Years to Maturity 1 $1,200 10.255 5 2 $1,000 6.7550 6 3 $1,175 12.110 7 Savings Account 5.500 Each unit of security 1, 2, and 3 guarantees to pay $1,000 at maturity. Investments in these securities must take place only at the beginning of year 1 and will be held until maturity. Any funds not invested in securities will be invested in a savings account that pays the annual interest rates noted above. The following table summarizes the cash needs for the expansion plan for each of the 8 years: Year 1 = $250,000 Year 5 = $295,000…
- If $ 650 is deposited at the end of each quarter into an account paying 11% compounded quarterly, how much money will be in that account after 6 years? Round your answer to two digits!Banyan Co.’s common stock currently sells for $30.75 per share. The growth rate is a constant 8%, and the company has an expected dividend yield of 4%. The expected long-run dividend payout ratio is 20%, and the expected return on equity (ROE) is 10.0%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.A borrower bought a house for $250,000; he can obtain an 80% loan with a 30-year fully amortizing, 6% interest rate and monthly payment. Assuming the marginal tax rate for the borrower is 25%. Maintain and insurance are currently $1,200 each per year, Selling cost is 6% of sale; property tax is 2% of the value each year, property value increases 5% per year. What is the first year total tax deduction from owning? $4250.0 $4920.71 53940.0 $3729.25
- We need to choose best among the three available investment alternatives high-risk stock, low-risk stock and savings account. Fixed payoff o: 500€ for savings account for the deposited amount. 200€ fixed fee needs to be paid towards trading charges. Payoffs details depends on market conditions as mentioned below. Which investment option you will choose and why? If you need any more details to solve this problem, please make your assumptions and list all the assumptions that you made. Market Up Market Same Market Down High Risk 1700 300 -800 Low Risk 1200 400 100 Probability 0.5 0.3 0.2A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent and 12.5 percent over the past 4 years. Which one of the following best describes the probability that this stock will produce a return of 22 percent or more in a single year? a. less than 5 percent but greater than 2.5 percent b. less than 1.0 percent but greater than 0.5 percent c. less than 2.5 percent but greater than .5 percent d. less than 0.1 percent e. less than 0.5 percent but greater than 0.1 percentOne of your customers is delinquent on hisaccounts payable balance. You’ve mutually agreed to a repayment schedule of $700per month. You will charge 1.3 percent per month interest on the overdue balance. Ifthe current balance is $21,500, how long will it take for the account to be paid off ?