RATE OF RETURN

FIVE YEARS AGO, AN ALUMNUS OF A SMALL UNIVERSITY DONATED $50,000 TO ESTABLISH A PERMANENT ENDOWMENT FOR SCHOLARSHIPS. THE FIRST SCHOLARSHIPS WERE AWARDED 5 YEARS AFTER THE MONEY WAS DONATED. IF THE AMOUNT AWARDED EACH YEAR (IE:, THE INTEREST) IS $5OOO, THE RATE OF RETURN EARNED ON THE FUND IS CLOSEST TO? A. 7.5% PER YEAR B. 10% PER YEAR C. 11% PER YEAR D. 14% PER YEAR

Municipal bond

A $10,000 municipal bond due in 10 years pays interest of $400.00 per year. If an investor purchases the bond now for $9,000 and holds it to maturity, the rate of return received by the investor will be closest to? A. 3.5% B. 4.2% C. 5.3% D. 6.9%

Mutually Exclusive

Consider the estimates below. If the alternatives are mutually exclusive and the MARR is 15% per year, the one(s) that shoild be selected is (are) ? Incremental Rate of Return, %, when Initial Alternative Compared with Alternative Alternative Investment Rate of Return A B C D E A -25,000 9.6 - 27.3 19.4 35.3 25 B -35,000 15.1 - 0 38.5 24.4 C -40,000 13.4 ... click for more

5 Consumer Mathematics Problems: WACC, Repurchase of stock, Treasury bond, Stock price, Price of bonds

1) Acetate, Inc., has equity with a market value of $20 million and debt with a market value of $10 million. The cost of the debt is 14 percent per annum. Treasury bills that mature in one year yield 8 percent per annum, and the expected return on the market portfolio over the next year is 18 percent. The beta of Acetate's equity is 0.9.The firm pays no taxes. a. What is Acetate's debt-equity ratio? b. What is the firm's weighted average cost of capital? c. What is the cost of capital for an otherwise identical all-equity firm? 2) Rayburn Manufacturing is currently an all-equity firm. The firm's equity is worth $2 million. The cost of that equity is 18 percent. Rayburn pays no taxes.... click for more

Finance Problems

(See attached files for full problem description) --- 1. If U.S. Treasury yields are as follows: 3 month 6.0% 6 month 6.3% 1 year 6.5% 2 year 6.6% 5 year 6.4% 10 year 7.5% 30 year 8.0% a. What is the expected yield on notes from year 1 to 2, assuming the PEH holds? b. What is the expected yield on notes from year 2 to 5, assuming the PEH holds? c. If inflation for the next year is expected to be 4.5%, what would the expected real rate of interest be on the 3-month T-bill? d. If inflation spikes during this period, and the actual inflation rate comes in ex- post at 6.3%, what would the actual real rate of interest be on the 3-month ... click for more