FIN 300 Study Guide - Final Guide: Capital Asset Pricing Model, Net Present Value, Weighted Arithmetic Mean

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sangriachimpanzee596

18 Apr 2012

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Detailed answers for selected problems from sample final exam (spring 2006, version #4: convert rate to weekly, result is 5. 9151. Use this rate, fv=0, pv = -150000, p/yr=52, n=1300 to get pmt=221. 05. Note n is measured as number of weeks in 25 years: using the perpetuity growth formula, 10 = 2. 12/(r-6%) Solving for r gives 27. 2%: ocf = d + ni = 10 + 100 = 110. Cffa = ocf + ncs + changenwc = 110 + 10 + 0 = 120: using capm, the e(r) formula for a is. 13. 5% = 7% + [e(rm) 7% ] * 1. 2 so the e(r) for the market is 12. 417% But the expected return given for b is 10. 5%, which is too low. So the price of b is too high: solve for pv using fv=200000, p/yr=4, n=80, i=16% and pmt=0, convert rate to monthly compounding = 8. 111676%

Related Questions

Time Value of Money Problems:

Can someone please create and solve at least three time value ofmoney problems in paragraph form. Two of the three time value ofmoney problems should be general present value, future value, orpayment problems given with an answer that includes the correctkeystrokes on the calculator, as well as the correct numericalanswer. The third problem must be an Amortization problem, with thecorrect calculator keystrokes given.

lemonimpala899

a perpetuity pays 1 every january 1 starting in 2020. The effective rate of interest will be i in odd numbered years and j in even-numbered years. Find an expression for the present value of the perpetuity on January 1, 2019.

The correct solution is Vj[1+Vi]*[1/(1-VjVi)] but i do not understand how this works. I know the formula to find the present value of a perpetuity is D/r, so i thought it would be .5[1/i+i/j] since each of the formulas for i and j are only half of the years. Please fix my logic here.

Contrary to the comment below there are no factors missing to solve this problem, granted you know the material. I provided the solution, which i found was based on a formula made specifically for even and odd year problems. I simply need someone who understands the material to give a step by step to get the solution with explanation if possible. Thanks in advance, it would be very helpful.

1. (TCO 1) The stock of Furniture Unlimited went from $91 to $100 last year. The firm also paid $1.55 in dividends. Compute the rate of return. 3. (TCO 4) What is the approximate yield to maturity of a 10% coupon rate, $1,000 par value bond that is currently priced at $1,250, with 10 years to maturity

4. (TCO 5) A convertible bond has a face value of $1,000 and the conversion price is $70 per share. The stock is selling at $35 per share. The bond pays $60 per year in interest and is selling in the market for $965. It matures in 7 years. Market rates are 10% annually. (I) What is the conversion ratio? (II) What is the conversion value?

6. (TCO 6) A fund is set up to charge a load. Its net asset value is $23.50 and its offer price is $24.80. What percentage of the offer price does the load represent?

7. (TCO 6) A shopping center has an annual net operating income of $1,200,500 and a capitalization rate of 12%. What is its value?

8. (TCO 7) Using the formula for the security market line, if the risk-free rate (RF) is 8%, the market rate of return (KM) is 11%, and the beta (bi) is 1.5, compute the anticipated return for stock i (Ki).

aquamarineeagle546

FIN 300 Study Guide - Final Guide: Capital Asset Pricing Model, Net Present Value, Weighted Arithmetic Mean

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