Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 2, Problem 4P
An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
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Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes):
Income Statement
Balance Sheet
Sales
Costs
$ 40,000 Assets
34,160
$26,000
Debt
Equity
$ 7,000
19,000
Net income $ 5,840
Total
$26,000
Total
$26,000
The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the
form of a cash dividend. Costs and assets vary with sales, but debt and equity do not.
Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate
calculations and round your answers to the nearest whole dollar amount.)
Pro forma income statement
Sales
Costs
$ 48000
40992
Assets
$ 31200
Pro forma balance sheet
Debt
7000
Equity
19000
Net income
$ 7008
Total
$ 31200
Total
30304
What is the external financing needed? (Do not round intermediate calculations. Negative amount
should be indicated by a minus sign.)
External financing needed
$
896
An insurance company has liabilities of £7 million due in 10 years' time and
£9 million due in 17 years' time.
The assets of the company consist of two zero-coupon bonds, one paying
£X million in 7 years' time and the other paying £Y million in 20 years' time.
The current interest rate is 6% per annum effective.
Find the nominal value of X (i.e. the amount, IN MILLIONS, that bond X pays
in 7 year's time) such that the first two conditions for Redington's theory of
immunisation are satisfied.
Express your answer to THREE DECIMAL PLACES.
An individual is investing in a market where spot rates and forward rates
apply.
In this market, if at time t=0 he agrees to invest £5.3 for two years, he will
receive £7.4 at time t=2 years. Alternatively, if at time t=0 he agrees to invest
£5.3 at time t=1 for either one year or two years, he will receive £7.5 or £7.3
at times t=2 and t=3, respectively.
Calculate the price per £5,000 nominal that the individual should pay for a
fixed-interest bond bearing annual interest of 6.6% and is redeemable after 3
years at 110%. State your answer at 2 decimal places.
Chapter 2 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 2 - Prob. 2QCh. 2 - Security A has an expected return of 7%, a...Ch. 2 - Prob. 4QCh. 2 - Prob. 5QCh. 2 - Your investment club has only two stocks in its...Ch. 2 - AA Corporations stock has a beta of 0.8. The...Ch. 2 - Suppose that the risk-free rate is 5% and that the...Ch. 2 - An analyst has modeled the stock of a company...Ch. 2 - Prob. 5PCh. 2 - The market and Stock J have the following...
Ch. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - Prob. 11PCh. 2 - Stock R has a beta of 1.5, Stock S has a beta of...Ch. 2 - Prob. 13PCh. 2 - You have observed the following returns over time:...Ch. 2 - Prob. 1MCCh. 2 - Prob. 2MCCh. 2 - Prob. 3MCCh. 2 - What is the stand-alone risk? Use the scenario...Ch. 2 - Prob. 5MCCh. 2 - Prob. 6MCCh. 2 - Prob. 7MCCh. 2 - Prob. 8MCCh. 2 - Prob. 9MCCh. 2 - Prob. 10MCCh. 2 - Prob. 11MCCh. 2 - Prob. 12MCCh. 2 - Prob. 13MCCh. 2 - Prob. 14MCCh. 2 - Prob. 15MCCh. 2 - Prob. 16MCCh. 2 - Prob. 17MCCh. 2 - Prob. 18MC
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