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- Consider two secunitios that pay risk-free cash flows over the next two yoars and that have the current market prices shown here (Click on the following icon in order to copy its contents into a spreadshoet) Price Today $384 Cash Flow in Two Years Security Cash Flow in One Year B1 $400 B2 $344 $400 a. What is the no-arbitrage price of a secunty that pays cash flows of $400 in one year and $400 in two years? b. What is the no arbitrage price of a security that pays cash flows of $400 in one year and $2,800 in two yoars? c. Suppose a security with cash flows of $200 in one year and $400 in two years is trading for a price of $520 What arbitrage opportunity is available? a. What is the no-arbitrage price of a secunity that pays cash flows of S400 in ono yoar and $400 in two yoars? The no arbitrage price is s (Round to the nearest dollar) b. What is the no-arbitrage price of a security that pays cash flows of $400 in one yoar and $2,800 in two years? The no-arbitrage price is S (Round to…(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return 0.10 −6 % 0.35 4 % 0.45 5 % 0.10 10 % (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The investment's expected return is enter your response here%. (Round to two decimal places.)Assume you deposit $1,000 in your savings account. Performance a sensitivity analysison the relationship between future value at the end of year 10 and interest rate. Plot therelationship on a chart and label the graph clearly
- 3. After studying the Financial Forecast and planning, go through the assumption date given below and calculate how much Discretionary financing will we need in 2021 year? Suppose this year's sales will total $32 million. Next year, we forecast sales of $50 million. Net income should be 5% of sales. Dividends should be 50% of earnings. If this year's information's are as follows: This year % of $32m Assets Current Assets Fixed Assets $8m 25% $16m. 50% Total Assets $24m Liab, and Equity Accounts Payable Accrued Expenses Notes Payable Long Term Debt $4m 12.5% $4m 12.5% $1m nla $6m Total Liabilities $15m Common Stock Retained Earnings Equity Total Liab. & Equity $7m nla $2m $9m $24m(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.6 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Return -4% 1% 6% 0.05 8% (Click on the icon in order to copy its contents into a spreadsheet.) Probability 0.05 0.35 0.55 a. The investment's expected return is 3.85%. (Round to two decimal places.) b. The investment's standard deviation is%. (Round to two decimal places.) CYour consulting firm will produce cash flows of $190,000 this year, and you expect cash flows thereafter to keep pace with any increase in the general level of prices. The interest rate currently is 5.2%, and you anticipate inflation of about 1.2%. a. What is the present value of your firm's cash flows for years 1 through 5? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value b. How would your answer to (a) change if you anticipated no growth in cash flow? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value
- To meet any shortfall in the previous question, NewBank will borrow the cash in the fed funds market. Management decides to borrow the needed funds for the remainder of the month (now 29 days). The required yield on a discount basis is 2.9%. What does the balance sheet look like after this transaction?You are researching interest rates and their forecasts. Your research provides you with the following: 1-year rate = 6% 2-year rate = 6.125% 3-year rate = 8.5% 1-year rate, 2 years from now = 6.5% Assuming you can borrow $1 million, can you use this interest rate information to earn some risk-free profit. if yes, compute the profit. Show detailed workings. Assume that the pure expectations theory applies.A financial analyst draws a cash flow diagram to model the following scenario. A 90-day commercial bill will mature for $200000. The price paid for the bill at issue was $196041.05. The bill was sold 19 days after issue for $196735.95. Calculate the annual rate of simple interest (as a percentage, to two decimal places) earned by the buyer who paid $196041.05 and sold for $196735.95. What was the annual rate of simple discount (as a percentage, to two decimal places) that the buyer sold at (earning a price of $196735.95)? Here is the cash flow diagram the analyst drew. Investor X S W N Which response best reflects the values of Z, Y, X, W, V, U, T and S? O a. Z is 90.00, Y is $200000.00, X is $196041.05, W is 19, V is $196735.95, U is not required, T is 8.29% p.a. (simple discount) and S is 6.91% p.a. (simple interest). O b. Z is 90.00, Y is $200000.00, X is $196041.05, W is 19, V is $196735.95, U is not required, T is 8.39% p.a. (simple discount) and S is 6.81% p.a. (simple interest).…
- Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million Liability - Bond B Modified Duration = 3.1 years Value = RM1.0 million a. Calculate the duration gap. b. What is the expected change in Net Worth if interest increases by 1%? c. What should or could you to achieve immunised balance sheet? Note: Please show all workings.Calculate the equity value of your margin account on each settlement date, including any additional equity required to meet a margin call. Also compute the amount of cash that will be returned to you on October 15th.ii. Calculate leverage multiplied for the contract.iii. Calculate the cumulative total holding period returns and cumulative spot holding period returns for each month.iv. Assuming that the investment pays no dividend and requires a storage cost of 1 percent (of current value), calculate the current (i.e., July 15th) implied spot price for a ton of the commodity and September 15th implied price for the same ton. In your calculations, assume that an annual riskfree rate of 5 percent prevails over the entire contract life.Your consulting firm will produce cash flows of $145,000 this year, and you expect cash flows thereafter to keep pace with any increase in the general level of prices. The interest rate currently is 6.9%, and you anticipate inflation of about 2.9%. a. What is the present value of your firm's cash flows for years 1 through 5? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value $ Present value 279,013.75 b. How would your answer to (a) change if you anticipated no growth in cash flow? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.