finance (risk premium)

5,132 results

Finance

If 10 year T bonds have a yield of 5.2%, 10 year corporate bonds yield 7.5%, the maturity risk premium on all 10 year bonds is 1.1%, and corporate bonds have a 0.2% liquidity premium versus a zero liquidity premium for T bonds, what is the default risk premium on the corporate...

Finance

If 10 year T bonds have a yield of 5.2%, 10 year corporate bonds yield 7.5%, the maturity risk premium on all 10 year bonds is 1.1%, and corporate bonds have a 0.2% liquidity premium versus a zero liquidity premium for T bonds, what is the default risk premium on the corporate...

Finance

If 10 year T bonds have a yield of 5.2%, 10 year corporate bonds yield 7.5%, the maturity risk premium on all 10 year bonds is 1.1%, and corporate bonds have a 0.2% liquidity premium versus a zero liquidity premium for T bonds, what is the default risk premium on the corporate...

Finance

If 10 year T bonds have a yield of 5.2%, 10 year corporate bonds yield 7.5%, the maturity risk premium on all 10 year bonds is 1.1%, and corporate bonds have a 0.2% liquidity premium versus a zero liquidity premium for T bonds, what is the default risk premium on the corporate...

FINANCE

1. Interest rates A particular security's default risk premium is 3 percent. For all securities, the inflation risk premium is 2 percent and the real interest rate is 2.25 percent. The security's liquidity risk premium is 0.75 percent and maturity risk premium is 0.90 percent...

personal finance

The interest rate is composed of _____ and the ______? a. risk-free rate,risk discount b.risk free rate, risk premium c.risk free rate, default risk premium d. none of the above

finance

NikkiG’s Corporation’s 10-year bonds are currently yielding a return of 7.00 percent. The expected inflation premium is 1.20 percent annually and the real risk-free rate is expected to be 2.40 percent annually over the next ten years. The liquidity risk premium on NikkiG...

finance (risk premium)

The risk premium is likely to be highest for? A. U.S. government bonds B. corporate bonds C. gold mining expedition D. either B or C I like C. I think th risk premium the rate added to the risk free rate would be highest for a gold mining expedition.

Finance

A stock has an expected return of 10 percent, the risk-free rate is 6 percent, and the market risk premium is 5 percent. The beta of this stock must be . Note that the market risk premium is given.

Finance

A stock has an expected return of 10 percent, the risk-free rate is 6 percent, and the market risk premium is 5 percent. The beta of this stock must be . Note that the market risk premium is given.

Finance

One way to think about the required rate of return is: as the highest return a risk-averse investor wants from an investment. as the risk-free rate of return plus a risk premium. as the historical rate of return plus a risk premium. as a comparison between the expected and ...

Introduction to finance

What's the formula for a required return? I have data for a company with a beta of 1.4, risk premium is 9% and the risk-free rate is 4%?

Finance

Suppose the market risk premium is 6.5% and the risk-free interest rate is 5%. Calculate the cost of capital of investing in a project with a beta of 1.2.

Investing

Kelly Inc's 5 yr bond yield 7.50% and 5 yr T Bonds yield 4.50%.The risk free rate is r*=2.5, the default risk premium for kelly bonds is DRP=0.40%, the liquity premium on kelly's bond is LP=2.6% versus zero on T-bonds, and the inflation premium ( IP) is 1.5%. What is the ...

finance (risk premium)

The risk premium is likely to be highest for A. U.S. government bonds B. corporate bonds C. gold mining expedition D. either B or C I like C the gold mining expedition I that correct??

Finance

Interest rate premiums A 5-year Treasury bond has a 5.2 percent yield. A 10-year Treasury bond yields 6.4 percent, and a 10-year corporate bond yields 8.4 percent. The market expects that inflation will average 2.5 percent over the next 10 years (IP10 _ 2.5%). Assume that ...

Managerial Finance

Assume that investors have recently become more risk averse, so the market risk premium has increased. Also, assume that the risk-free rate and expected inflation have not changed. Which of the following is most likely to occur? A. The required rate of return for an average ...

Finance

risk free rate 5.5% market premium 6% beta 0.8 expected dividend $1.00 common stock $25.00 growth 6% bond yeild 6.5% capital struture 25% debt 15% preferred stock 60% common equity tax rate 40% preferred stock price $95 preferred dividend $11. what firm cost of equity using ...

Finance

In February 2011 the risk-free rate was 4.50 percent, the market risk premium was 7.00 percent, and the beta for Dell stock was 1.50. What is the expected return that was consistent with the systematic risk associated with the returns on Dell stock

finance

If you expect the inflation premium to be 2%, the default risk premium to be 1%, and the real interest rate to be 4%, then what interest rate would you expect to observe in the marketplace on short-Term Treasury Securities?

Finance

What is the relatiomship between the required risk premium on a portfolio and the price at which the portfolio will sell? Like as the required premium increases, will the price be higher or lower?

Finance

kollo enterprise has beta 0.82 real risk freerate 2.00% investors expected 3.00% future inflation rate, market risk premium is 4.70% what kollo's required rate of return?

Managerial Finance

The real risk-free rate is 2.1%. Inflation is expected to be 2.2% this year, 3.95% next year, and then 3.05% thereafter. The maturity risk premium is estimated to be 0.05(t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Round your ...

Economics

If 10-year T-bonds have a yield of 5.2%, 10-year corporate bonds yield 7.5%, the maturity risk premium on all 10-year bonds is 1.1%, and corporate bonds have a 0.2% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate...

Finance

IBM's common stock has a beta of 0.85. If the expected risk-free return is 4.5% and the market risk premium is 7%. a) Calculate IBM’s required rate of return (10pts) b) Assume IBM’s actual realized return is 15%. Calculate its abnormal return (i.e. alpha). (5pts)

Investments/Portfolio Mgt

How would the following be solved... Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $50,000 or $150,000, with equal probabilities of 0.5. The alternative riskless investment in T-bills pays 5%. a. If you require a risk premium ...

Corporate Finance

The T-bill rate is 6 percent and the market risk premium is 8 percent, the expected return is 9%, the beta is .3 what is the specific benchmark?

Finance

Answers for a 10 year us treasury bond has a 3.50 % interest rate, while a same maturity corporate bond has a 5.25 % interest rate. Real interest rates and inflation rate expectations would be for the two bonds. if default risk premium of 1.50 percentage points is estimated ...

Finance

The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per share annually. Investors believe the nominal risk-free rate is 4 percent and that this stock should have a risk premium of 6 percent. What should be the value of this stock? TO compute, use the ...

Finance

Calculate the required rate of return for Mercury Inc. to the nearest .1 Assume that investors expect a 3.0 percent rate of inflation in the future. The real risk-free rate is equal to 5.8 percent and the market risk premium is 9.3 percent. Mercury has a beta of 1.5 , and its ...

Finance

Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $70,000 or $200,000 with equal probabilities of 0.5. The alternative risk-free investment in T-bills pays 6 percent per year. a) If you require a risk premium of 12 percent, how ...

FINANCE

4. Liquidity Premium Hypothesis Suppose we observe the following rates: 1R1 = 8 percent, 1R2 = 10 percent, and E(2r1) = 8 percent. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2, L2?

Need help by tonite Finance

4. Liquidity Premium Hypothesis Suppose we observe the following rates: 1R1 = 8 percent, 1R2 = 10 percent, and E(2r1) = 8 percent. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2, L2?

Need help by tonite FINANCE

2. Interest rates A two-year Treasury security currently earns 5.25 percent. Over the next two years, the real interest rate is expected to be 3.00 percent per year and the inflation premium is expected to be 2.00 percent per year. What is the maturity risk premium on the two-...

FINANCE

2. Interest rates A two-year Treasury security currently earns 5.25 percent. Over the next two years, the real interest rate is expected to be 3.00 percent per year and the inflation premium is expected to be 2.00 percent per year. What is the maturity risk premium on the two-...

Finance

Rollincoast Incorporated issued BBB bonds two years ago that provided a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at that time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the ...

Finance

Rollincoast Incorporated issued BBB bonds two years ago that provided a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at that time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the ...

Finance

using the CAPM, compute the expected rate of return for a portfolio with 25% stake in company A and 75% stake in company B. Assume a market risj premium of 3% and a risk free rate of 4%.

finance

A stock has a beta of 2.0. A security analyst who specializes in studying this stock expects its return to be 24%. Suppose the risk-free rate is 6 percent and the market-risk premium is 10 percent. Is the stock overvalued or undervalued relative to the market’s expectation? ...

finance

the joseph company has a stock issue that pays a fixed dividend of 3.00 per share annually. Investors believe the normal rik-free rate is 4 percent and that this stock is 14 percent,and that this stock should have a risk premium of 6 percent

finance management

Suppose a firm estimates its cost of capital for the coming year at 10%, what are reasonable costs of capital for evaluating average-risk, high-risk, and lo-risk projects?

Finance

The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.25, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current ...

Finance

Teddy Company paid a $3.50 dividend this year (D0 = $3.50). Next year the company expects to pay a $4.00 dividend (D1 = $4.00). The stock's dividend is expected to grow at a rate of 15 percent a year until three years from now (t = 3). After this time, the stock's dividend is ...

Business Finance

Firms exposed to the risk of interest rate changes may reduce that risk by doing what

MGT 437

Which one of the following is not a project risk? a)Political Risk b) Department Risk c) Technical Risk d) Schedule Risk e) Production Risk

Finance

For the first time in a very long time (perhaps ever!), the concept of financial risk and risk management has become a topic of concern at Presidential press conferences. Such concern has centered on esoteric financial products such as derivatives that are used to manage risk...

finance

Given the following table: Type of Security Interest Rate 5-Year Treasury Note 5% 5-Year Corporate Bond (High quality) 6% 5-Year Corporate Bond (Low quality) 8% Calculate the default risk premium (DRP) on the Corporate bonds.

finance

compare business risk and financial risk

College Finance

1.A recent edition of The Wall Street Journal reported interest rates of 10.75 percent, 11.10 percent, 11.48 percent, and 11.75 percent for 3-, 4-, 5-, and 6-year Treasury security yields, respectively. According to the unbiased expectation theory of the term structure of ...

financial management

A treasury bond that matures in 10 years has a yield of 6%. A 10 year corporate bond has a yield of 9%. assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?

Finance

3. Given the following information for Janicek Power Co., find the WACC. Assume the company’s tax rate is 35%. Debt: 8,500 7.2% coupon bonds outstanding, $1000 par value, 25 years to maturity, selling for 118% of par; the bonds make semiannual payments Common Stock: 225,000 ...

finance (higher interest rate)

A higher interest rate (discount rate) would? A. reduce the price of corporate bonds B. reduce the price of preferred stock C. reduce the price of common stock D. all of the above I remember reading about the relationship between interest and bonds/stocks. When the FR raises ...

Banking Finance

The change in ‘yield to maturity’ for a high risk company will most likely be ________________ than for a low risk company.

Finance

To measure an investment's risk, you may use all of the following except: A. time value B. range of returns C. standard deviation of returns D. subjective measures of risk

Financial Management

Reading Foods is interested in calculating its weighted average cost of capital (WACC). The company’s CFO has collected the following information: • The target capital structure consists of 40 percent debt and 60 percent common stock. • The company has 20-year ...

Finance

To measure an investment risk, you may use all of the following except: A. Time value of money B. range of returns c. standard deviation of returns d. subjective measures of risk

finance

Define the following terms and identify their role in finance: 1. Finance 2. Efficient Market 3. Primary Market 4. Secondary Market 5. Risk 6. Security 7. Stock 8. Bond 9. Capital 10. Debt 11. Yield 12. Rate of Return 13. Return on Investment 14. Cash Flow

Finance

Which of the following statments is CORRECT? a. Assume that two bonds have equal maturities and are of equal risk, but one bond sells at par while the other sells at a premium above par. The premium bond must have a lower current yeild and a higher capital gains yield than the...

Math (Accounting)

Reading Foods is interested in calculating its weighted average cost of capital (WACC). The company’s CFO has collected the following information: • The target capital structure consists of 40 percent debt and 60 percent common stock. • The company has 20-year ...

Accounting PLEASE HELP!!!!!!!!!

Reading Foods is interested in calculating its weighted average cost of capital (WACC). The company’s CFO has collected the following information: • The target capital structure consists of 40 percent debt and 60 percent common stock. • The company has 20-year ...

Business

Based on this financial info where a company's Beta Year = 2008, the Company's commons stock = 0.85, the Risk-Free Rate of Return = 5%, and the Market Risk Premium = 6%. Use the dividend growth model to calculate the Company's Common Stock in 2008. Stock 1 = 1.5, Stock 2 = 0....

Finance

Jim Bob is a stock picking genius. Every year, based on his system, he has the ability to invest $100 (only) in a security that is expected to earn a 20% return over the next year. That security always has a beta of one. Assume that the risk free rate is 4%, and the market ...

Math

Stock Market History a. What was the average rate of return on large U.S. common stocks from 1900 to 2001? b. What was the average risk premium on large stocks? C. What was the standard deviation of returns on the market portfolio? a. Which index? Inflation adjusted or not? b...

Corporate Finance

1. Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston evaluates low-risk projects with a WACC of 8%, average projects at 10%, and high-risk projects at 12%. The company is...

finance

You are considering an investment in a one year government debt security with a yeild od 5% or a highly liquid corporate debt security with a yeild of 6.5%. The expected inflation rate for the next year is expected to be 2.5%. A. what would be your real rate earned on either ...

finance

AAA has only stock and bonds in its capital structure. Balance sheet information: Long term debt (par value--NOT number of bonds) = $20,000,000, Common equity and retained earings = $17,000,000, and Shares of stock outstanding = 1,000,000. Bond information: Bond price ($1,000 ...

consumer math

amy miller's insurance policy has a $218.00 premium for 25/100 bodily injury limits and $25,000.00 property damage limits. the collision premium is $74.00. amy's driving-rating factor is 2.4. what is her annual premium?

Math

Shonetta Woods has a limited payment insurance policy with an annual premium of $1,125.00 until age 65. She pays the premium quarterly at an increased rate of 26.2 percent per quarter. How much money can Shonetta save in one year by paying the premium annually? Is it $54.00?

Finance

9. The variable (A) in the utility formula represents the: a. investor’s return requirement. b. investor’s aversion to risk. c. certainty equivalent rate of the portfolio. d. preference for one unit of return per four units of risk.

Statistics

Types of bonds are divided into three categories: good risk, medium risk, and poor risk. Assume that of a total of 13,838 bonds, 7,035 are good risk, 1,388 are medium risk, and the rest are poor risk. One bond is chosen risk? Write only a number as your answer. Round to two ...

Statistics

Types of bonds are divided into three categories: good risk, medium risk, and poor risk. Assume that of a total of 13,838 bonds, 7,035 are good risk, 1,388 are medium risk, and the rest are poor risk. One bond is chosen risk? Write only a number as your answer. Round to two ...

finance

6. You are considering an investment in a one-year government debt security with a yield of 5 percent or a highly liquid corporate debt security with a yield of 6.5 percent. The expected inflation rate for the next year is expected to be 2.5 percent. a. What would be your real...

Finance

You are considering an investment in a one-year government debt security with a yield of 5 percent or a highly liquid corporate debt security with a yield of 6.5 percent. The expected inflation rate for the next year is expected to be 2.5 percent. A. What would be your real ...

Finance

You are considering an investment in a one-year government debt security with a yield of 5 percent or a highly liquid corporate debt security with a yield of 6.5 percent. The expected inflation rate for the next year is expected to be 2.5 percent. a. What would be your real ...

Finance

As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in 8 years, have a coupon rate of 9.5% on a face value of $1,000. Currently, the bonds are selling for $872. a. If you required ...

finance

1. Yest Corporation's bonds have a 15-year maturity, a 7% semiannual coupon, and a par value of $1,000. The market interest rate (r) is 6%, based on semiannual compounding. What is the bond’s price? 2. A 20-year, $1,000 par value bond has a 9% annual coupon. The bond ...

Finance

You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. The one stock has a beta of .80. What does the beta of the second stock have to be if you want the portfolio risk to equal that of the overall market?

Finance

Zabberer Corporation bonds pay a coupon rate of interest of 12 percent annually and have a maturity value of $1000. The bonds are scheduled to mature at the end of 14 years. The company has the option to call the bonds in 8 years at the premium of 12 percent above the maturity...

finance

You are a risk manager that needs to hedge the IR risk on a portfolio of bonds. Your hedging instruments are futures and swaps. Discuss how you would go about mitigating sensitivity to changes in the interest rates. You may consider either bucketing the risk or using a ...

Finance Challenge

The new RDS project is somewhat riskier than a typical project for DEI, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of 3 percent to account for this increased riskiness. Calculate the appropriate discount rate to ...

billing/coding

which of the following statements about risk management is true? a)risk management is concerned with reducing exposure to legal liability b) risk management is a spontaneous response to an unexpected incident C) risk management is unique to the heatlh care industry d) risk ...

economics

(Insurance) Let X = R+. Consider a house owner whose house has a risk of burning down with probability 0.001. If the house burns down it is worth $0 otherwise it is worth $1 million. The owner of the house is an expected utility maximizer with a vNM utility function u(x) = x^(...

Math-Statistics

An advisor offers 8 mutual funds in the high risk category, 7 moderate, 10 in low risk. The investor decides to invest in 3 high risk, 4 moderate risk, and 10 low risk. How many ways can he do this?

Managerial Economics

Suppose your company is considering three health insurance policies. The first policy requires no tests and covers all preexisting illnesses. The second policy requires that all covered employees test negative for the HIV virus. The third policy does not cover HIV- or AIDS-...

Math

An advisor offers 8 mutual funds in the high risk category, 7 moderate, 10 in low risk. The investor decides to invest in 3 high risk, 4 moderate risk, and 10 low risk. How many ways can he do this?

Probability

An advisor offers 8 mutual funds in the high risk category, 7 moderate, 10 in low risk. The investor decides to invest in 3 high risk, 4 moderate risk, and 10 low risk. How many ways can he do this?

Statistics

An advisor offers 8 mutual funds in the high risk category, 7 moderate, 10 in low risk. The investor decides to invest in 3 high risk, 4 moderate risk, and 10 low risk. How many ways can he do this?

Finance question

Suppose CAPM is true. You are considering investing in an equally weighted portfolio of two stocks, A and B. The betas of these stocks to the market factor are 1.10 and 0.80, respectively. The total return volatilities of stocks A and B are σA=0.20 and σB=0.18, and ...

Finance

P5. A thirty U.S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten-year Treasury bond has an interest rate of 2.5 percent. A maturity risk premium is estimated to be .2 percentage points for the longer maturity bond. Investors expect inflation to average 1.5 ...

Finance

6. You are considering an investment in a one-year government debt security with a yield of 5 percent or a highly liquid corporate debt security with a yield of 6.5 percent. The expected inflation rate for the next year is expected to be 2.5 percent. a. What would be your real...

allied health part 2-21

which of the following statements about risk management is true? a. risk management is unique to the health care industry b. risk management is controlled and managed by hipaa regulations. c. risk management is concerned with reducing exposure to legal liability d. risk ...

finance

A thirty year US Treasury bond has a 4.0% interest rate.In contrast a ten year treasury bond has an interest rate of 3.7%. If inflation is expected to average 1.5% points over both the next ten years and thirty years, determine the maturity risk premium for the thirty year ...

Finance

United Technology Corporation (UTC) has $40 million of convertible bonds outstanding (40,000 bonds at $1,000 par value) with a coupon rate of 11 percent. Interest rates are currently 8 percent for bond of equal risk. The bonds have 15 years left to maturity. The bonds may be ...

Financing

K Group just paid a $1.25 dividend per share. The dividend is expected to grow at 28% per annum for the next eight years. After that, this growth rate is expected to be 6% indefinitely. Presume that the beta of K Group is 1.2, and the risk premium 7.5% and the risk-free rate ...

accounting

A company has an insurance policy for fifty thousand dollars that is due. How is this set up when the company does not pay it in full. It is paid monthly to an insurance premium company within one year. How do we set it up on the company books? There is a note to Premium ...

finance

Kuai, I need help in this part: Debt: 227,000 7.4 percent coupon bonds outstanding, 25 years to maturity, selling for 109 percent of par; the bonds have a $1,000 par value each and make semiannual payments. Common stock: 8,500,000 shares outstanding, selling for $70.70 per ...

math

A home was valued at &73,500. It was insured for 80% of its value at a premium of &0.40 per $100. Find the yearly premium.

math

Types of bonds are divided into three categories: good risk, medium risk, and poor risk. Assume that of a total of 13,838 bonds, 7,035 are good risk, 1,388 are medium risk, and the rest are poor risk. One bond is chosen is chosen at random. what is the probability that the ...

Finance

A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten-year Treasury bond has an interest rate of 3.7 percent. If inflation is expected to average 1.5 percentage points over both the next ten years and thirty years, determine the maturity risk ...

English

Please read for any errors. And correct them. The premium on your disability insurance policy is overdue. Don’t let his valuable policy lapse. If you become disabled you will receive a monthly income from this policy. This disability policy provides importance security for ...

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