Alpha's beta is 1.06, the present T-bond rate is 6%, and the return on the S&P 500 is 15.25%. What is Alpha's cost of common equity using the CAPM approach? A) 21.25% B) 15.81% C) 9.25% D) 6.32%

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A: The ideal capital design is assessed by computing the blend of obligation and value that limits…

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A: Solution:- Current Yield means the percentage of coupon amount to the current market price of bond.…

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A: Bonds are long-term debt instruments by which companies raise funds. They require a fixed interest…

Q: 8. An easy way to calculate the cost of debt is to: A Observe the rate of a similar issued bond that…

A: Debt refers to borrowed funds used in the capital structure. The expense incurred on debt is the…

Q: Blue Fire has an equity multiplier of 2.4, a total asset turnover of .35, and a profit margin of 8.5…

A: Equity multiplier = 2.4 times Total asset turnover = 0.35 times Profit Margin = 8.5%

Q: 5.940%

A: WACC= Cost of equity (ke) * weight of equity + Cost of debt(kd) * weight of debt.

Q: A firm has an outstanding bond paying a coupon rate of 12%. The firm's tax rate is 34%. If the…

A: The question is based on the concept of Financial Accounting.

Q: at equation was used to get the Aftertax Cost of Debt?   Debt Face Value…

A: After tax cost of debt is yield to maturity adjusted to the tax rate.

Q: You need to calculate the ABC Corporation's cost of debt, cost of equity, and WACC. Here's what's…

A: The rate at which a company finances all of its capital i.e, debt and equity is known as WACC. This…

Q: How will it be possible to sell bonds paying investors 6.25% when other, similar investments will…

A:

Q: Subject: Financial strategy & policy Question No 4…

A: Capital Asset Pricing Model: It is a model that is used to explain the association between…

Q: 7. Plot the (positive) prices (Y axis) of a new 10-year, 10% bond and a new 2-year, 10% bond against…

A: Coupon rate = 10%Range of market rate = 0%,2%,5%,8%,10%,12%,15%,20%,25%,30%,45%Maturity of bond 1 =…

Q: Red Fire has a Debt/Equity Ratio of .1, a return on sales of 3.4, and an asset turnover of 2.3. What…

A: Calculation of ROE using DuPont Formula:   ROE = Return on Sales * Asset Turnover * Financial…

Q: Which of the following bonds will provide the largest capital gain if interest rates decrease?…

A: When interest rates decrease, the prices of existing bonds generally increase. This is because the…

Q: Based on the information from Question 42 ~ 44, what would be the company’s new cost of equity if it…

A: We need to determine cost of equity by using CAPM. The equation is  Ke =Rf+Beta(Rm-Rf) Where  Ke =…

Q: A firm is trying to determine the cost of equity for its financial structure. The company's equity…

A: The Security Market Line (SML) is a graphical representation of the Capital Asset Pricing Model…

Q: Disney Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 5.80%. The real risk-free rate is r*…

A: Maturity Risk Premium is the extra return expected by investor  for bearing the maturity risk…

Q: What is the present value (PV) of $300,000 received six years from now, assuming the interest rate…

A: The amount that is expected to be obtained by an investor for making any investment today will be…

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A: Value of a bond: Value of a bond is the present value of the future cash flows discounted at a…

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A: The  calculation of return on equity ,Return of equity is the measure of company annual return as it…

Q: am. 161.

A: A) Estimate the current cost of debt and equity of the company:Step 1:Cost of Debt (Kd):…

Q: n = 10 r0,0 = 5% u = 1.1 d = 0.9 q = 1 - q = ½ Compute the initial price of a zero-coupon bond…

A: Calculation of the price of ZCB is shown below: Hence, the initial Price is $74.62.

Q: The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.67% while…

A: We have to find the cost of equity in two different cases, using two different methods.

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A: The expected return on debt is the effective market rate of interest at the time of the issue of the…

Q: (7.8) The interest rate investors expect on a new bond issue can be determined by computing the for…

A: Bonds are fixed-income assets that serve as a representation of investor loans to borrowers…

Q: What is the maturity risk premium (MRP) on all 5-year bonds?

A: We can determine the maturity risk premium using the formula below:

Q: please help thanks A firm raises capital by selling \(\$ 10,000 \) worth of debt with flotation…

A: YTM means Yield to maturity.It is calculated by following formula:-Yield to maturity = whereRV=…

Q: Calculate Cost of Common Equity using CAPM (Capital Asset Pricing Model), DCF (Discounted Cash Flow…

A: As per CAPM, Cost of Common Equity = Risk free rate + Beta * (Market Risk premium) Where, risk free…

Q: You are choosing between these four investments and you want to be 95% certain that you do Small…

A: To make comparison among the investment it is important to analyse the risk and return of the…

Q: 3. Company WACC is 20%. Debt interest rate is 4% and D/ E ratio is 1,6. What is the cost of equity?…

A: Weighted Average Cost of Capital = WACC = 20% Cost of debt = 4% Debt equity Ratio = 1.6

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.