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natulia [17]
3 years ago
13

Suppose that you just paid $76,000 for a security that will make its first payment to you in 7 years from today. It will continu

e to make equal annual payments every year indefinitely. Find the size of the payments that you will receive from the security if the interest rate is 5%
Business
1 answer:
iogann1982 [59]3 years ago
7 0

Answer:

$5,346.98

Explanation:

Initial cash flow = 76,000

Discount rate = 5%

Suppose the C.F. in the 7th year is x which will flow till perpetuity

Present value of annual cash flow till perpetuity = Annual cash flow / Discount rate

PV at the 7th year = x/0.05

Discount factor = (1 + r)^n

Discount rate = 5%

Years   D. factor   Cash flows

0                 0            76,000

1           0.952381            -

2          0.907029           -

3          0.863838           -

4          0.822702           -

5          0.783526           -

6          0.746215            -

7           0.710681          x/0.05

So, 76000 = 0.710681 *(x/0.05)

76000 / 0.710681  = x / 0.05

x = 76000 / 0.710681 * 0.05

x = 5346.98408990813

x = 5346.98

Hence, if the interest rate is 5%, $5346.98 will be received annually from the 7th year

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Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio'
MA_775_DIABLO [31]

Answer:

The new portfolio beta is 1.31 rounded off to two decimal places.

Explanation:

The portfolio beta is a function of the sum of the weighted average betas of the individual stock's that form up the portfolio. The portfolio beta is calculated using the following formula,

Portfolio beta = wA * Beta of A + wB * Beta of B + ... + wN * Beta of N

Where,

  • w is the weightage of each stock in the portfolio

The beta of the portfolio when one stock with a beta of 1 is sold is,

The sum of individual stock betas for 19 stocks is = 20 * 1.31  -  1 * 1  = 25.2

The new portfolio beta when one stock with a beta of 0.97 is added is,

Portfolio beta = (25.2 + 0.97) / 20

Portfolio beta = 1.3085 rounded off to 1.31

4 0
3 years ago
Janice really likes potatoes. Potatoes cost $1 per pound, and she has $5.00 that she could possibly spend on potatoes or other i
fiasKO [112]

Answer:

A) Janice will purchase 3 pounds of potatoes since she will buy them until her consumer surplus ≤ 0. The fourth pound of potatoes costs $1, and Janice is willing to pay only $0.30, so her consumer surplus s negative (-$0.70).

Consumer surplus is the difference between the price that a customer is willing and able to pay for a good and the good actual price.

B) If Janice only had $2 to spend, she would buy 2 pounds of potatoes, since her consumer surplus is positive at 2 pounds.

first pound costs $1, and Janice is willing to pay $1.50, consumer surplus = $0.50

second pound costs $1, and Janice is willing to pay $1.14, consumer surplus = $0.14

3 0
3 years ago
Company Expenses Total Assets Net Income Total Liabilities Dreamworks $ 22,000 $ 40,000 $ 19,000 $ 30,000 Pixar 67,000 150,000 2
Luda [366]

Answer:

                      Expenses   Total Assets   Net Income   Total Liabilities

Dreamworks   $22,000      $40,000         $19,000         $30,000

Pixar                $67,000      $150,000        $27,000        $147,000

Universal         $12,000      $68,000          $5,000          $17,000

<u>Debt ratio:</u> Total Debt / Total Assets

Dreamworks = $30,000 / $40,000 = 0.75

Pixar = $147,000 / $150,000 = 0.98

Universal = $17,000 / $68,000 = 0.25

<u>Financial Leverage:</u> Asset / Equity

Dreamworks = $40,000 / (40,000-30,0000) = 4

Pixar = $150,000 / (150,000-147,000) = 50

Universal = $68,000 / (68,000-17000) = 1.33

Pixar Has the most financial leverage.

7 0
3 years ago
A gift of money or goods from the groom or his kin to the bride's kin is referred to as:
Bond [772]
Bride wealth or bride price
6 0
3 years ago
United Machining's margin was 2% and turnover was 3.0 on sales of $60 million for the year. On the basis on this information____
Hunter-Best [27]

Answer:

B, net income for the year was $1,200,000, average assets were $20 million, ROI was 6%

Explanation:

net income is calculated by multiplying the percentage margin by the sales. We have,

(2 ÷ 100) × $60,000,000

= 0.02 × $60,000,000

= $1,200,000

To calculate the average assets, sales is divided by the turnover.

we have, ($60,000,000 ÷ 3.0)

= $20,000,000.

To calculate the ROI, margin and turnover are multiplied.

we have,

(2% × 3.0) = 6%

Cheers.

3 0
3 years ago
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