Because of the open-air configuration of upscale specialty stores, coupled with entertainment and restaurants, ________ are very
1 answer:
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Answer:
Bond Price = $875.6574005 rounded off to $875.66
Explanation:
To calculate the price of the bond today, we will use the formula for the price of the bond. We assume that the interest rate provided is stated in annual terms. As the bond is an annual bond, the coupon payment, number of periods and annual YTM will be,
Coupon Payment (C) = 1,000 * 0.05 = $50
Total periods (n) = 3
r or YTM = 0.10
The formula to calculate the price of the bonds today is attached.
Bond Price = 50 * [( 1 - (1+0.10)^-3) / 0.10] + 1000 / (1+0.10)^3
Bond Price = $875.6574005 rounded off to $875.66
Answer:
Explanation:
1.
According to the CAPM model
Fair return = Risk-free rate of return + (Beta × Market Premium)
For $1 discount store:
Expected return = 4% +(1.5 × 6%)
Expected return = 0.04 + (1.5 × 0.06)
Expected return = 0.04 + 0.09
Expected return = 0.13
Expected return = 13%
For everything $5
Expected Return = 4% + (1 × 6%)
Expected return = 0.04 + (1 × 0.06)
Expected return = 0.04 + 0.06
Expected return = 0.10
Expected return = 10%
2.
From the above calculation;
For $1 discount store:
Since the expected return is greater than the forecasted return at 12%.
Thus, it is overpriced.
For everything $5
Here, it is obvious from the above calculation that the expected return is lesser than the forecasted return at 11%.
Therefore, it is underpriced.
3) Beta can be defined as the security change that takes place due to market functuations. Thus, Beta manages the systematic risk associated with firms. From the information given, Kaskin Inc. has a more systematic risk(beta) than Quinn Inc. Thus, option A is the most accurate.
4)
To first find the growth rate by using CAPM model.
Required return = Risk free return + (market return - risk free return)
Required return = 0.08 + 1(0.18 - 0.08)
Required return = 18%
Using the formula:
Required return = (next year dividend/current price) + growth rate
18% = (9/100) + g
0.18 = 0.09 g
g = 0.09
Growth rate g = 9%
To determine the price at year 1; we have:
=
= $109.00
Therefore, the investor can earn a profit of $9 after selling the stock for $109 at the end of the year 1.
5.
According to beta
For portfolio A.
Risk premium per unit = (21 - 8)%/1.3
Risk premium per unit = (0.21 - 0.08)/1.3
Risk premium per unit = 0.1
Risk premium per unit = 10%
For portfolio B.
Risk premium per unit = (17 - 8)%/0.7
Risk premium per unit = (0.17 - 0.08)/0.7
Risk premium per unit = 0.1286
Risk premium per unit = 12.86%
From above, it is clear that the risk associated with portfolio B is lesser compared to portfolio A.
Thus; the correct option is b. A; B