Everything else held constant, if the expected return on bonds falls from 10 to 5 percent and the expectedrelativereturn on GE stock rises from 7 to 8 percent, then the expected return of holding GE stockto bonds and the demand for GE stockfalls; rises.rises; fallsrises; rises.falls; falls

The objective of the question is to understand the impact of changes in expected returns on the…

Answered: Everything else held constant, if the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years.Compute the value of this stock with a required return of 10 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Using the information for Northern Resorts & Hotels presented in the table below, determine the following: 1.The last price paid for a share of stock on this trading day. 2. Amount of income per share paid to a stockholder in the last 12 months. 3. Percentage of change in the stock's price since the beginning of the year.
Consider the three stocks in the following table. P represents price at time t, and represents shares outstanding at time t. Stock C splits two for one in the last period. A B с P 20 250 80 P₁ 21 85 250 25 85 30 800 800 25 65 800 80 800 40 Rate of return P2 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t=0 to t= 1). (Do not round intermediate calculations. Round your answer to 2 decimal places.) New divisor % Rate of return Q2 b. Calculate the new divisor for the price-weighted index in year 2. (Do not round intermediate calculations. Round your answer to 2 decimal places.) 250 800 1,600 c. Calculate the rate of return for the second period (t=1 to t= 2). (Round your answer to 2 decimal places.) %
The present value of JECK Co.'s expected free cash flow is $90 million. If JECK has $25 million in debt, $4 million in cash, and 3.8 million shares outstanding, what is its share price?
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $750. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price $ 8,500 $ 10,500 $ 11,500 Interest Yield, % 7.89 5.56 b. What generalization can you draw from the completed table? O Bond prices and interest rates are not related. O There is insufficient data to make a generalization. O Bond prices and interest rates are directly related. O Bond prices and interest rates are inversely related.
What is an economically meaningful corporate event from a shareholders’ ownership perspective? a. stock buyback b. stock split c. stock dividend
According to the efficient market theory, prices of actively traded stocks can be under- or over-valued in an efficient market, and bear searching out. prices of actively traded stocks do not differ from their true values in an efficient market. prices of actively traded stocks can only be under-valued in an efficient market prices of actively traded stocks can only be over-valued in an efficient market.
Explain what the term "bond price elasticity" means. Would bond price elasticity indicate that zero-coupon or high-coupon bonds with the same yield to maturity have a greater price sensitivity? Why? What does this mean for the market value volatility of zero-coupon Treasury bonds vs high-coupon Treasury bonds in mutual funds?
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Given the following financial data for Bank of America (2020): Net Income $17,894Total Assets $2,832,182Total Liabilities $2,559,258 The return on equity (ROE) is? Round answer to three decimal place. Do not use a dollar sign.
Suppose instead Larry decides to buy 100 shares of NanoSpeck stock. Which of the following statements are correct? Check all that apply. O C The price of his shares will rise if NanoSpeck issues additional shares of stock. NanoSpeck earns revenue when Larry purchases 100 shares, even if he purchases them from an existing shareholder. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Larry's shares to decline.

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Everything else held constant, if the expected return on bonds falls from 10 to 5 percent and the expected relative return on GE stock rises from 7 to 8 percent, then the expected return of holding GE stock to bonds and the demand for GE stock falls; rises. rises; falls rises; rises. falls; falls