SuperSky Plc issued shares, where the covariance between the SuperSky Pic shares and the UK stock market index is 24, while the variance of the market is 30. The yield on the UKtreasury bills (gilts) currently is 5%, and the return on the UK stock market index is 13%. What is the company's cost of equity?OA 13%OB 11.4%OC. 15.4%OD. None of the options are correct

Answered: Image /qna-images/answer/d1985b1b-4940-4d37-957e-54517d4109b5.jpg

SuperSky Pic issued shares, where the covariance between the SuperSky Pic shares and the UK stock market index is 24, while the variance of the market is 30. The yield on the UK treasury bills (gits) currently is 5%, and the return on the UK stock market index is 13%. What is the company's cost of equity? OA 13% OB 114% OC 15.4% OD. None of the options are correct

SuperSky Pic issued shares, where the covariance between the SuperSky Pic shares and the UK stock market index is 24, while the variance of the market is 30. The yield on the UK treasury bills (gits) currently is 5%, and the return on the UK stock market index is 13%. What is the company's cost of equity? OA 13% OB 114% OC 15.4% OD. None of the options are correct

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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According to the Bloomberg Network (a Financial TV channel), the current return on the U.S T-bill is 4.0% and the market risk premium is 8.5%. Given this news, in the table below, the only stock that is correctly priced is: See attached table a. Stock E b. Stock C c. Stock B d. Stock A e. Stock D
The price of an American call on a non-dividend-paying stock is $4. The stock price is $31, the strike price is $30, and the expiration date is in 3 months. The risk-free interest rate is 8%. The upper and lower bounds for the price of an American put on the same stock with the same strike price and expiration date is $3.00 and $2.41, respectively. Explain carefully the arbitrage opportunities if the American put price is greater than the calculated upper bound.
Lordstown Motors common stock has an E(R) = 13.92%. What is Lordstown’s beta if Rm = 12% and the return on T-bills is 2.4%? a. .60 b. 1.08 c. 1.20 d. .83 e. 4.80
The shares of DCB Bank are currently valued at $27 and they have a volatility of 28% pa. The risk free rate is 6% pa. You many find this table showing the values of the standard normal cumulative distribution function useful. a) Calculate the price of a European call option on these shares, with strike price $28 and a term to expiration of 9 years. Give your answer in dollars and cents to the nearest cent. HINT: This question does not interpolate values from the standard normal cumulative distribution. For this particular question, when looking up z values from the distribution, first round your calculated value of z to two decimal places and then use that rounded z value to find F(z). Price of call option = $ DCB bank have just announced that a dividend of $0.72 will be paid in 1 years time and an additional dividend of $1.28 will be paid in 8 years time. b) Taking this new information into account, calculate the adjusted price of the call option. Give your answer in dollars and cents…
Q4: TFS pays no dividends, and is trading at $103.00 with a volatility of 35.00%. The risk free rate is 10.00%. Construct a one step binomial tree (using the method u = option expiring in 12 months. Which of the following strike prices is the smallest one at which the put would be exercised early (at time t = 0)? elr-8)T+ovT ete.) to price an American style put A) $128.00 B) $129.00 C) $133.00 D) $124.00 E) $130.00
Carmax, Inc. common stock currently sells for $95.89 per share, and the standard deviation of returns is 44.58%. A call option with a strike price of $95.00 is currently trading on the market. The option expires in three months, and the risk - free rate of return is 4.4%. Carmax does not pay a dividend. Carmax's gamma (\Gamma) is: Group of answer choices 0.01829 0.00528 0.01723 0.01866
Carmax, Inc. common stock currently sells for $106.45 per share, and the standard deviation of returns is 44.91%. A call option with a strike price of $95.00 is currently trading on the market. The option expires in three months, and the risk-free rate of return is 2.6%. Carmax does not pay a dividend. Carmax's gamma (Γ) is: Group of answer choices 0.00391 0.01353 0.01526 0.01541
Imagine TOP HAT Prefabs issued common shares at a market price of GBP 88 and paid dividends of GBP 6 in 2020. If dividends in 2021 are expected to grow by 5%, the market by 8%, and flotation costs are 20% of market price, what would the company’s cost of equity be? Current market price is GBP 99 and the gilt bond (UK government) gives a 1% rate. If TOPHAT Prefabs was planning to provide a constant growth rate of dividends, what would this growth rate be considering that the UK Gilt rate is 1,5%, the expected rate of return of the market is 3% and the CAPM is 12%? The company needs to purchase raw materials and decides to contract 2 loans for a period of 5 years, as follows: a GBP 80,000 with a 3% semi-annual interest rate and a GBP 150,000 with a 2% quarterly interest rate. What is the effective interest rate for TOPHAT Prefabs? The company decides to renew its manufacturing equipment and sell 2 assembling machines at a price of GBP 15,000 and GBP 25,000 respectively. The…
12. The following are prices of call options traded on Pineapple inc., which pays no dividends Call Options Exercise price = $200 Exercise price = $205 one month $4.50 $3.00 three month $6.25 $5.00 six month $9.00 $7.50 The stock is trading at $202 and the annualized riskless rate is 2%. The standard deviation in ln(stock prices) (Based on historical data) is 15%. What is the implied standard deviation in the six month call with a strike price of $200? Please show solution on excel or with formula. Thanks
Consider two stocks: Stocks Current Price Possible Prices after one year Stock ABC $12.00 ABC + = $13.60 ABC – = $11.20 Stock XYZ $10.00 ABC + = $11.75 ABC – = $8.80 Assume a risk-free borrowing and lending rate is 5.20% and that neither stock pays dicidends, and a fractional shares can be bought and sold. *** Give the same stocks, ABC and XYZ. Suppose you find that there is an arbitrage opportunity involving a forward contract. Let ABC stock sell at $12.00 and that you borrow to buy 1000 shares of stock ABC at 5.20% interest by issuing a risk-free bond. You also entered into a forward contract to sell this share at $14.00 one period later and that you also see an opportunity to engage in the bondsmarket risk-free.Question: Show that, given a higher or a lower price of ABC and XYZ, is an opportunity to gain profit. Show your complete solution.
McDonald's Corp purchased the following portfolio of trading securities during 2014 and reported the following balances at December 31, 2014. No sales occurred during 2014. All declines are considered to be temporary. Security Cost FMV @ 12/31/2014 X $80,000 $82,000 Y 140,000 132,000 Z 32,000 28,000 The carrying value of the portfolio at 12/31/2014, on McDonald's balance sheet would be:

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