The range of intrinsic values of shares of the company on the basis of different values of estimated dividend for next year, the rate of return on equity and growth rate and the inputs that will justify the current stock price. Introduction: Sensitivity Analysis: It refers to the calculation of the values of a particular variable on the basis of different values of other variables on which the particular variable is dependent. In other words, in sensitivity analysis, the range of values of a particular variable is computed on the basis of different values of other variables or inputs.

Question

See the chart below. The top line shows the 90 day yield on corporate bonds and the bottom line is the US Treasury bill (TB) rate for similar maturity. The yield is shown on the y-axis. Notice that the gap between the two curves got wider during the recession years of 2008-2009. Which of the following reasons can possibly explain this widening? FRED 6 сл 5 4 3 2 1 0 -1 2006 · 1950 2008 2010 2012 2014 Shaded areas indicate US recessions - 2014 research.stlouisfed.org A) During the recession, the government decided to cut the tax rate on interest earned from corporate bonds but not on interest earned on TB. B) During the recession, the relative risk on corporate bonds increased. C) During the recession, the relative liquidity of corporate bonds increased. D) Two of the first three options can explain this. E) All of the first three options can explain this.

Answer 1

Question

Chapter 9, Problem 8TCL

Summary Introduction

To calculate: The range of intrinsic values of shares of the company on the basis of different values of estimated dividend for next year, the rate of return on equity and growth rate and the inputs that will justify the current stock price.

Introduction:

Sensitivity Analysis:

It refers to the calculation of the values of a particular variable on the basis of different values of other variables on which the particular variable is dependent. In other words, in sensitivity analysis, the range of values of a particular variable is computed on the basis of different values of other variables or inputs.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

See the chart below. The top line shows the 90 day yield on corporate bonds and the bottom line is the US Treasury bill (TB) rate for similar maturity. The yield is shown on the y-axis. Notice that the gap between the two curves got wider during the recession years of 2008-2009. Which of the following reasons can possibly explain this widening? FRED 6 сл 5 4 3 2 1 0 -1 2006 · 1950 2008 2010 2012 2014 Shaded areas indicate US recessions - 2014 research.stlouisfed.org A) During the recession, the government decided to cut the tax rate on interest earned from corporate bonds but not on interest earned on TB. B) During the recession, the relative risk on corporate bonds increased. C) During the recession, the relative liquidity of corporate bonds increased. D) Two of the first three options can explain this. E) All of the first three options can explain this.

Don't used Ai solution