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Here is the correct order of investments from Lower Risk to Higher Risk: <span> Treasury bond − Diversified mutual fund – Stock
Treasury bond is released by Government, so unless your country went bankrupt, it is safe to assume that you will get the investment back.
Diversified mutual fund puts your eggs in a lot of baskets So in case one of your investment fail, the others could still support your overall investments
Since the stock is a single entity and really fluctuative, it is considered as the most dangerous type of investment.
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Answer:
The WACC will be 10% for average risk
below when the risk is low
and above 10% when the risk is higher than average
as the cost of capital (required return from the stockholders) will increase pushing the WACC higher
Explanation:
As the WACC is composed by the cost of debt and the cost of equity a higher risk will require a better return for the investor thus, the equity proportion that determinates the WACC will change along the project risk.
Answer:
The formula for average is =AVERAGE(E15,E16).
The formula for highest is =MAX(F15,F16).
The formula for lowest is =MIN(G15,G16).
Explanation:
In MS Excel, on the left hand side below the tool bar there is a small box which tells the cell name where the cursor is clicked, the name of the cell can be changed from here easily, click on the desired cell and then by clicking on the box you can enter the name of the cell. After a cell is renamed the formula can be written by simply putting the name of the cell instead of the original e.g. E13
The formula for average is =AVERAGE(E15,E16).
The formula for highest is =MAX(F15,F16).
The formula for lowest is =MIN(G15,G16).
The cells provided in the formula above is just an example and more than two cells can be selected.
Answer:
value of the bond = $2,033.33
Explanation:
We know,
Value of the bond, ![B_{0} = [I * \frac{1 - (1 + i)^{-n}}{i}] + \frac{FV}{(1 + i)^n}](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5BI%20%2A%20%5Cfrac%7B1%20-%20%281%20%2B%20i%29%5E%7B-n%7D%7D%7Bi%7D%5D%20%2B%20%5Cfrac%7BFV%7D%7B%281%20%2B%20i%29%5En%7D)
Here,
Face value of par value, FV = $2,000
Coupon payment, I = Face value or Par value × coupon rate
Coupon payment, I = $2,000 × 6.04%
Coupon payment, I = $128
yield to maturity, i = 6.1% = 0.061
number of years, n = 15
Therefore, putting the value in the formula, we can get,
![B_{0} = [128 * \frac{1 - (1 + 0.061)^{-7}}{0.061}] + [\frac{2,000}{(1 + 0.061)^7}]](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5B128%20%2A%20%5Cfrac%7B1%20-%20%281%20%2B%200.061%29%5E%7B-7%7D%7D%7B0.061%7D%5D%20%2B%20%5B%5Cfrac%7B2%2C000%7D%7B%281%20%2B%200.061%29%5E7%7D%5D)
or, ![B_{0} = [128 * \frac{1 - (1.061)^{-7}}{0.061}] + [\frac{2,000}{(1.061)^7}]](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5B128%20%2A%20%5Cfrac%7B1%20-%20%281.061%29%5E%7B-7%7D%7D%7B0.061%7D%5D%20%2B%20%5B%5Cfrac%7B2%2C000%7D%7B%281.061%29%5E7%7D%5D)
or, ![B_{0} = [128 * \frac{0.3393}{0.061}] + 1,321.3635](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5B128%20%2A%20%5Cfrac%7B0.3393%7D%7B0.061%7D%5D%20%2B%201%2C321.3635)
or, ![B_{0} = [128 * 5.5623] + 1,321.3635](https://tex.z-dn.net/?f=B_%7B0%7D%20%3D%20%5B128%20%2A%205.5623%5D%20%2B%201%2C321.3635)
or,
$711.9738 + 1,321.3635
Therefore, value of the bond = $2,033.33