Use these assumptions. Inflation is 5%. The Rod Serling bank pays 4.5% interest on checking compounded monthly, and 6% interest on savings compounded annually. You are in the 22% marginal tax bracket. Use equations 5.2 through 5.5 on page 98 & 99. A) What is the APY for checking accounts at the Rod Serling bank? B) What is the RAPY for savings accounts at the Rod Serling bank? C) Suppose I own a gas station that has assets worth $250,000, and owes $100,000 on a bank loan and has 10,000 shares of stock outstanding. Based on these factors alone, what is a rational price per share? (Use equation 6.1) D) Use Equation 6.2 to answer the following. For my gas station that has 10,000 shares sold to random investors, suppose I promise to pay $1 annual dividend and the prevailing market interest rate is 5%. What would be the rational market price for my stock based entirely on these factors?
Use these assumptions. Inflation is 5%. The Rod Serling bank pays 4.5% interest on checking compounded monthly, and 6% interest on savings compounded annually. You are in the 22% marginal tax bracket. Use equations 5.2 through 5.5 on page 98 & 99. A) What is the APY for checking accounts at the Rod Serling bank? B) What is the RAPY for savings accounts at the Rod Serling bank? C) Suppose I own a gas station that has assets worth $250,000, and owes $100,000 on a bank loan and has 10,000 shares of stock outstanding. Based on these factors alone, what is a rational price per share? (Use equation 6.1) D) Use Equation 6.2 to answer the following. For my gas station that has 10,000 shares sold to random investors, suppose I promise to pay $1 annual dividend and the prevailing market interest rate is 5%. What would be the rational market price for my stock based entirely on these factors?
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
Related questions
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Transcribed Image Text:Use these assumptions. Inflation is 5%. The Rod Serling bank pays 4.5% interest
on checking compounded monthly, and 6% interest on savings compounded
annually. You are in the 22% marginal tax bracket. Use equations 5.2 through 5.5
on page 98 & 99.
A) What is the APY for checking accounts at the Rod Serling bank?
B) What is the RAPY for savings accounts at the Rod Serling bank?
C) Suppose I own a gas station that has assets worth $250,000, and owes
$100,000 on a bank loan and has 10,000 shares of stock outstanding. Based on
these factors alone, what is a rational price per share? (Use equation 6.1)
D) Use Equation 6.2 to answer the following. For my gas station that has 10,000
shares sold to random investors, suppose I promise to pay $1 annual dividend
and the prevailing market interest rate is 5%. What would be the rational market
price for my stock based entirely on these factors?
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