You buy a TIPS bond issued at par for $1,000. The bond pays…
You buy a TIPS bond issued at par for $1,000. The bond pays a 3% annual coupon. Inflation turns out to be 2.5% in the first year and 6% in the second year. The total annual coupon income in year 2 is _______ because you locked in a risk-free ________ return.
Read DetailsYou forecast a company will generate $250 million of free ca…
You forecast a company will generate $250 million of free cash flow to the firm (FCFF) next year, grow at 5% per year for the following 2 years, and then slow to a long-run, steady state growth rate of 2% thereafter. You estimate a 10% weighted average cost of capital (WACC) and a 12.5% cost of equity. If the company owes $1.0 billion of debt, what is the estimated value of the firm’s total equity?
Read DetailsYou buy 50 shares of stock on margin for $500 per share, and…
You buy 50 shares of stock on margin for $500 per share, and post an initial margin of 50%. If the stock rises by 22% over the course of the year and you are charged 9% on the amount you borrowed, what is your rate of return on the trade? (the stock does not pay dividends)
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