Answer:
The repo rate is 3.09% percent
Explanation:
We can use the following formula to calculate the Repo rate
Repo Rate = ( ( Sale Price / Purchase Price ) - 1 ) x ( 360 / n ) x 100
Where
Sale Price = $10,000,000
Purchase Price = $9,923,418
n = 90 days
Placing values in the formula
Repo Rate = ( ( $10,000,000 / $9,923,418 ) - 1 ) x ( 360 / 90 ) x 100
Repo Rate = 3.08692%
Repo Rate = 3.09
Answer:
7.82%
Explanation:
In CAPM (capital asset pricing model), cost of equity = Risk free rate of return + Beta × (market rate of return – risk free rate of return)
T-bill is treasury bill backed up by governement, then cosidered is risk free rate.
Using the CAPM, the company's cost of equity = T-bills yielding 4.4% + beta 1.14 x (market risk premium 7.4% - T-bills yielding 4.4%)
= 4.4% +1.14*(7.4%-4.4%) = 7.82%
Answer:
The price hike in the price of steel would cause an inflationary push in the U.S. economy, because steel is a input to the production processes of many firms.
In this scenario, the fed would lower the money supply in order to stop the inflationary push from continuing. To do so, the fed would sell government securities.
Answer:
False
Explanation:
The first part was true. A higher WACC results in a lower NPV simply because a higher discount rate results in a lower present value.
E.g. 100 / (1 + 6%)³ = 83.96, but if we increase r to 10%, then 100 / (1 + 10%)³ = 75.13
The second part is wrong because under the IRR method, the decision rule is very simple, all projects are accepted if their IRR is higher than the project's WACC (or discount rate). I.e. if hte project's WACC increases, so does the chance of the project being rejected because the IRR might be lower than the WACC.
