The futures price for an asset is $60. Expiration is in 3 months, and the risk free rate is 4%. If the asset does not pay a dividend, what should the spot price be if there is no absence of arbitrage?

Q: Calculate the IRR and NPV for a $1,000,000 investment with a 5% return annually over a 5 year period…

A: The terms "net present value" (NPV) and "net present worth" (NPW) are used to describe a set of…

Q: Maroon has an expected return of 20%, and a variance of 0.015. Gray has an expected return of 19%,…

A:

Q: When a company collects the face value of a bond investment at maturity, total assets increase. O…

A: Given statement:When a company collects the face value of a bond investment at maturity, total…

Q: Maturity (years). 2 3 4 $89.23 5 $87.53 Price $94.53 $91.83 The above table shows the price per $100…

A: Zero coupon Bond is a bond which is issued at discount and only maturity value is paid at the end of…

Q: Oswego Plumbing Works (ticker, OPW) just announced that it will cut next year's dividend, D₁, from…

A: As per Gordon Growth ModelPrice = D / (r-g)r = D / Price + gHerer = rate of InterestD= Dividend next…

Q: Fama's Llamas has a WACC of 9.4 percent. The company's cost of equity is 13 percent, and its pretax…

A: WACC is also known as weighted average cost of capital. It includes the cost of debt & cost of…

Q: Fitzgerald Computers is considering a new project whose data are shown below. The required equipment…

A: Equipment cost = $65,000Straight line depreciation rate = 33.33%Number of projects life = 4…

Q: Robinson Robotics is considering two mutually exclusive projects, Project A and Project B.  The…

A: NPV (Net Present Value) is a financial metric used to evaluate the profitability of an investment by…

Q: Raymond Mining Corporation has 8.6 million shares of common stock outstanding, 300,000 shares of 5%…

A: WACC or cost of capital or company' s discount rate is the overall cost of capital of all sources of…

Q: The company incurs costs of $27.7 million regardless of the output level. It sells 5.68 million…

A: GivenSales units = 5.68 MPrice = 8.79Variable Cost =10.20 mcontribution ratio = (sales price -…

Q: The rate of earnings is 6% and the cash to be received in 4 years is $20,000. The present value…

A: We will use the discount factor corresponding to 6% interest rate and Year 4.So, discount rate will…

Q: Graphical Designs is offering 15-15 preferred stock. The stock will pay an annual dividend of $15…

A: Preferred stock represent ownership in a company. This aspect of preferred stock is the same as…

Q: Asume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the…

A: Return for Stock A =1.5%+1.2*(10%-1.5%) =11.70%Return for Stock B =1.5%+0.5*(10%-1.5%) =5.75%Return…

Q: June Watson is contributing $1,500 each year to a Roth IRA. The IRA earns 3.9% per year. How much…

A: Future value can be calculated usingFV (rate, nper, pmt, [Pv], [type])Rate The interest rateNper…

Q: Darius Inc. is considering a project that has the following cash flow data. Given WACC = 10%, what…

A: The NPV of a project refers to the measure of the profitability of the project calculated by…

Q: (Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest,…

A: Honor code:As per the Q&A guidelines, if multiple subparts are asked at once then the answer for…

Q: $48.29

A: Given :-Current year dividend paid (D0) = $2.37First year Growth= 25%Now First year growth in…

Q: An investment has an installed cost of $537,800. The cash flows over the four-year life of the…

A: A number of financial computations, including figuring out the present value of future cash flows,…

Q: Stock prices over 5 months are observed to be $110.00, $115.00, $98.00, $107.00, and $112.00. What…

A: The annualized standard deviation for the given prices of the stock over the months can be found by…

Q: 21. The Nintendo entertainment system (NES) was introduced to the North American market in 1985 at…

A: Price of NES @ 1985 = $180PCEPI in 1985 = 53.0PCEPI in 2022 = 123.1PCEPI is the measure of the…

Q: You decide to invest in a portfolio consisting of 24 percent Stock A, 50 percent Stock B, and the…

A: The portfolio variance shows how the performance of various investments in a portfolio differs from…

Q: Use the Black-Scholes formula to calculate today's value of a call option, based on the following:

A: Given information:S = Current stock price = $K = Strike price = $r = Risk-free rate (annual) = 4% t…

Q: A company purchased an asset for $3,700.000 that will be used in a 3-year project. The asset is in…

A: Purchase price of asset =3,700,000Number of years =31-year depreciation =33.33%2-year depreciation…

Q: Apple Inc. (AAPL) is expected to pay a dividend of $1.59 at the end of the year. AAPL’s dividend…

A: A Stock of an equity share is a capital market security that offers the investor the ownership…

Q: a. What is the effective annual interest rate on this lending arrangement? Note: Do not round…

A: a)Monthly Interest = amount borrowed * Interest rate                          = 70,000,000 * 0.375%…

Q: You have looked at the current financial statements for J&R Homes, Company. The company has an EBIT…

A: Free cash flow method is to calculate the value of firm and value of equity which in return used to…

Q: A company has operating income of Rs. 5,00,000. The firms cost of debt is 10% and firm employs Rs.…

A: According to Modigliani-Miller (MM) Theory, under the assumption of no taxes and without considering…

Q: Jackson Corporation’s bonds have 12 years remaining o maturity. Interes tis paid annually the bonds…

A: The total return expected on a bond or other fixed-interest investment kept until it matures is…

Q: A U.S. firm holds an asset in France and faces the following scenario: State 3 25% State 1 25% $…

A: Here, YearState-1State-2State-3State-4Probability25%25%25%25%Spot Rate1.851.751.651.55P* €…

Q: Assume that there is a bond that pays $50 at the and of year 1 and $50 at the end of year 2. It…

A: Macauley duration = Where PVC = Present value of future cash flows from the bondt = timeP0 = Current…

Q: The CFO of Lenox Industries hired you as a consultant to help estimate its cost of capital. You have…

A: Cost of equity refers to the amount that is required to distribute or pay to shareholders for using…

Q: Block stock sells for $31 per share. It just paid a dividend of $1.14 per share. The company has a…

A: The cost of equity is the required rate of return based on the expectation of shareholders based on…

Q: If the Brazilian real is equal to $0.46, a Canadian dollar is equal to how many Brazilian reals?

A: 1 Brazilian real is equal to $0.46, therefore exchange rate is 1 Brazilian real = $0.46

Q: Fraser Company will need a new warehouse in eight years. The warehouse will cost $430,000 to build.…

A: Pvf@i = 1/(1+i)^ni= interest raten= number of yearPresent Value= Cash flow * Pvf@i

Q: Assume you have taken out a 25-year loan of $177,390 with an annual interest rate of 6.72%,…

A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…

Q: There is a zero coupon bond that sells for $414.68 and has a par value of $1,000. If the bond has 14…

A: Yield to maturity can be calculated by following function in excel=RATE (nper, pmt, pv, [fv],…

Q: Dynamic - Problem and answer changes with each attempt (consider an Excel solution) Monet,…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: Investing: Lesser-Known Stocks The following question is based on the following information about…

A: Investing in stock involves purchasing ownership in a company represented by shares or stocks. As a…

Q: Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects…

A: IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…

Q: TBTF Bank makes a 7 year interest only loan to AFC Inc of $4,300,000.00. The interest rate on the…

A: Loan amount=4300000.00Period=7 yearsInterest rate=8.125%Reinvestment rate=5.25%

Q: Copy of According to the yields below, what is the 2-year forward rate 3 years from now? Answer as a…

A: According to pure expectation theory short term rate and long term rate should be in line with each…

Q: How would you incorporate salvage value into the excel

A: The NPV of a project refers to its profitability measured by discounting all cash flows to the…

Q: Cost of Bank Loans Del Hawley, owner of Hawley's Hardware, is negotiating with First City Bank for a…

A: Effective annual rate (EAR) or annual percentage yield (APY) refers to the rate of interest that is…

Q: Your grandma invested some money 58 years ago into an account earning 2.5 % per year, compounded…

A: Compound interest is the interest that is calculated not only on the initial principal amount but…

Q: Transactions Costs and the Efficiency of Alternative Remedies Scenario 1 (Assume it costs $300 to…

A: Transaction costs play a significant role in determining the efficiency of economic transactions and…

Q: A property was purchased for $5170.00 down and payments of $1588.00 at the end of every three months…

A: Purchase price refers to the price at which the property is to be purchased by the purchaser from…

Q: At age 26, you start an IRA to save for retirement. You deposit $125 at the end of each month. If…

A: Annuity refers to a stream of constant periodic cash flows. For instance a cash flow of $100 each…

Q: The current price of the Exchange Traded Fund YHT, which does not pay dividends, is $12.5 per share.…

A: To calculate the lowest possible value of combined position in 3 months, we need to consider the…

Q: Assume the total market value of General Motors​ (GM)’s capital structure is​ $10 billion. GM has a…

A: WACC is also known as Weighted Average Cost of Capital. It includes the cost of debt & cost of…

Q: Which of the following statements is CORRECT? Assume that the project being considered has normal…

A: Internal rate of return (IRR) is the discount rate of a project which makes its NPV=0. It is a…

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.