nty r Uf thisRate of Return if Weak Below Average Average Above Average Strong 0
ID: 2782000 • Letter: N
Question
nty r Uf thisRate of Return if Weak Below Average Average Above Average Strong 0.1 0.2 0.4 0.2 .50% -5% 16% 25% 60% Calculate the stock's Expected Return, the Variance, and Standard Deviation. (15) (b)The XYZ Corporation has a beta of 1.2. If the risk-free rate is currently at 4% and the average return on the market is 7%. According to SML what would the required rate of return of the stock be? a) Peter Lynch wants to sell you an investment contract that pays equal $10,000 amounts at the end of each of the next 30 years. If you require an annual rate of return of 5% on your investment, how much will you pay for the contract today? 4. paying an interest rate of 5% per year . If you retire in 40 years, how much will you have? b) Suppose you plan to contribute $5,000 every year into a retirement account You are offered an investment that will pay you $200 the first year, $400 the next year and $5000 the third year (all payments will be end-of-year). You can earn 6% very similar investments. What is the most you should pay today for this one? e) a) United Bank offers you a $500,000, thirty-year amortized loan at 7% annual interest What will your MONTHLY loan payment be? 5 In order to accumulate $2,000,000 for retirement in 45 years, a young investor wishes to know how much to save every year into a savings program yielding 4% per year. b) c) A life insurance company is trying to sell you an investment policy that will pay and your heirs $10,000 per year, in perpetuity. If your required return on this inves is 596, how much will you pay for the policy?Explanation / Answer
net present value= sum of present cash flows, interest rate = 6%
= 200/(1.06)^1 + 400 / (1.06)^2 + 5000/(1.06)^3 ( remember years start from one insted of zero as oayments are end of the years)
=188.67+356 + 4198=4742.76
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