Describe the intuition behind the Gordon growth model and the CAPM. What are the theoretical and practical problems associated with each model?

Q: nsurance is a way to decrease the ffinancial risk from unexpected events, like an illness, car…

A: Insurance is a very important tool in finance which helps us to mitigate risks and reduce risks due…

Q: A person has $30,000 to invest As the person's financial consultant you recommend that the money be…

A: Investment must be diversified so that overall return is better and consistent and overall risk of…

Q: According to your analysis, stock ABC is overvalued. What is the best course of action?

A: Stock Overvalued: A stock is said to be overvalued when its current market price is greater than…

Q: A stock has a current price of $267. A trader writes 9 naked option contracts on the stock, each…

A: Here, Current Price is $267 No. of Naked Options is 9 No. of shares per option is 100 Option Price…

Q: Stock price can only move up or down until option expiration (two outcomes). Prices of up (down)…

A: Price of the Securities = $1 The payoff with the Up scenario = 4 The payoff with down scenario = 10…

Q: Nate. borrowed Php 2000.00 from Mr. Mark on June 1,1928 and Php 500.00 on June 1, 1930, agreeing…

A:

Q: Mr. Francis requires Rs. 20,000 at the beginning of each year from 2033 to 2037. The interest rate…

A: Deposits or withdrawal of equal amount of money at equal intervals of time for a fixed number of…

Q: Marta purchased a home with an adjustable rate mortgage. The margin on an adjustable-rate mortgage…

A: A Loan refers to the amount of money taken by one party named borrower from the other party named…

Q: is best noted for three principal categories that analyze and interpret how communications and…

A: As per Bartleby guidelines, If multiple questions are posted , only first 1 question will be…

Q: The insurance Commissioner must approve which of the following types of insurance rates prior to…

A: An insurance is defined as the method of the risk management with the regard to one's properties or…

Q: Bilbo Baggins has just purchased a home and taken out a $400,000 mortgage. The mortgage has a…

A: The monthly payment amount can be calculated with the help of present value of annuity function

Q: For the following ordinary annuity, determine the size of the periodic payment Present Payment…

A: Present Value of Ordinary Annuity refers to the concept which dictates the discounted value of a sum…

Q: Project L requires an initial outlay at t = 0 of $45,000, its expected cash inflows are $11,000 per…

A: FORMULA NPV = [CF*(1-(1+R)-N)/R]-CF0 Where NPV - Net present value CF - Annual cash inflow i.e.…

Q: One main assumption underlying the segmented markets theory is that:

A: Segmented Market Theory: This theory states that the short-term interest rates and long-term…

Q: If Phil borrows $40,000 from a loan company at an interest rate of 6.5% per year compounded weekly,…

A: Here, Loan amount = $40,000 Quarterly payment of the loan = $800 Interest rate = 6.5% compounded…

Q: college can purchase a telephone system for $35000 or lease a system for 5 years for a front-end…

A: Present value analysis is a technique for evaluating capital budgeting decisions. A company should…

Q: $1,000 $1,000 2T $500 $500 2 3 4 5 6 2 3 4 5 EOY EOY 3T.

A: For calculating the value of 'T' we shall find the present value of both the cash flows and compare…

Q: cts) eBook A firm with a WACC of 10% is considering the following mutually…

A: NPV= Present value of cashinflows - Present value of cashoutflows.

Q: Interpret the results: • Return on equity • Return on assets • Gross profit margin • Operating…

A: The financial ratios are used as a measure of the financial health of the company.

Q: On January 2, 2021, an Australian Copper Exploration Company was investigating the feasibility of…

A: Net Present Value (NPV) of a project is the sum of the present value of all cash inflows and…

Q: Q5-) A regional infrastructure building and maintenance contractor must decide to buy a new compact…

A: Capital budgeting decisions should be evaluated based on present value of benefits or costs.…

Q: a) What is the size of each quarterly payment? b) What is the outstanding principal at the end of…

A: Mortgage amortization refers to a schedule which is prepared to shows the periodic loan payments,…

Q: e) P130,000,00 5. QC Corp. declared its dividend consistent with its dividend yield of 0.10. This…

A: Dividend Yield refers to the ratio which shows the return potential or investor in form of cash…

Q: Riley Enterprises and Lane Industries both have new projects that require an initial investment of…

A: Internal rate of return can be defined as the capital budgeting technique which brings down the net…

Q: On the day his son was born, a father deposited to a trust company a sufficient amount of money so…

A: Future value of an investment is the value of total money in the investment account at a future…

Q: Discuss the strengths and weakness of the Newer Innovative health financing mechanisms

A: Innovative financing can enable private investors to participate in health more quickly and bring…

Q: Banyan Co.’s common stock currently sells for $56.25 per share. The growth rate is a constant 6%,…

A: Cost of Equity is the rate of return that  the firm has to pay to its equity investors. It is the…

Q: A mutual fund has $400 million worth of stock, $500,000 in cash, and $1 million in other assets. The…

A: Mutual funds refer to one type of financial vehicle that pools money from many investors and invests…

Q: arbitrage profit can an investor earn

A: Spot rate (S) : 1 EUR = 1.3694 CAD  1 year Forward rate (F) : 1 EUR = 1.3335 CAD Interest rate: rEUR…

Q: The interest rate for the first five years of a $28,000 mortgage loan was 3.35% compounded…

A: Given, Meaning of mortgage loan:- It is a loan which is secured and helps to avail the funds where…

Q: Suppose there are only three assets (A, B, and C) in a market. Given the following information:…

A: Formula for expected return of the portfolio will be:

Q: Border Crossing has no debt and a cost of capital of 11.2 percent. Assume the firm switches to a…

A: Weight of debt and equity: Debt = 0.25 /1.25 = 0.2 Equity 1/1.25 = 0.8

Q: 4. Two large-scale conduits are under consideration by a large municipal utility district (MUD). The…

A: The Present Value: The total value of future cash flows at the current date is known as its present…

Q: (a) DEVCON Industries is considering issuing a $20,000,000 15-year bond in early 2022, with an…

A: Given: Particulars Amount Face value(FV) $1,000 Years 15 Coupon rate 4% Yield  4.50%

Q: A. Calculate the NPV on both Cars. Round your present value factor to three decimal places and the…

A: Net present value (NPV) of an alternative/project refers to the variance between the initial…

Q: You want to buy a $205,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan…

A: Home value = $205,000 Down payment = 0.10 (10%) Monthly interest rate (r) = 0.00345833333333333…

Q: JHOPE "I am your hope" Company has 10% net profit margin on sales in previous years and exp same…

A: Additional fund needed can be calculated by using this equation Additional funds needed(ANF)…

Q: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence,…

A: Dividend discount model  is a model as formulated by Myron J. Gordon, which is used to forecast the…

Q: Discuss the 10-year Bond rate of UK government as proxy of risk-free rate.

A: In finance risk free rate is a very important concept. The risk free rate means that interest rate…

Q: Peter makes a deposit at the end of every three months into a savings account that earns interest at…

A: Interest earned on savings - 3.2% quarterly Period for which it is saved - 9 years Conversion of…

Q: 3b. A company made an additional (incremental) income of $10,000 during the last week of the year.…

A: Tax can be defined as an amount paid to the government on the income. It is a compulsory…

Q: As one of the loan officers for Grove Gate Bank, calculate the monthly principal and interest, PI…

A: Here, Amount Financed = $240,000 Interest rate = 7.50% Term of loan = 25 years Annual Property tax =…

Q: Annual depreciation, $2,500                                        Annual mileage, 13,200 Current…

A: Operating cost can be defined as the ongoing cost that is incurred in a business or operating a…

Q: Sun Instruments expects to issue new stock at $36 a share with estimated flotation costs of 9…

A: Stock price = $36 Flotation cost = 9% Current dividend = $1.70 Growth rate = 3%

Q: On December 31, 2020, Berclair Inc. had 500 million shares of common stock and 3 million shares of 9…

A: Given,   Net income   = $800 million   Preferred dividend  =  ( 9% ×$100=$9/share)…

Q: e NPV of the project if

A: Net present value refers to the amount which is used to capture the value of the potential…

Q: The graph below shows the rate of change of the price of a stock (in dollar share of the stock…

A: Price of stock do changes in market as period goes on due to the buying and selling in the market…

Q: The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to…

A: The DCF approach , can be applied as follows,        Cost of Equity =Expected dividend Curretn…

Q: Use a calculator to evaluate the amortization formula m =  P   r n   1 −   1 +  r n   −nt   for the…

A:

Q: Ja. A company made an additional (incremental) income of $10,000 during the last week of the year.…

A: The main source of income for government is the tax collected from both individuals and businesses.…

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.