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Attached are the problems I need help with. I need to see the work on how to solve as well as the solutions. PROBLEMS -
Attached are the problems I need help with. I need to see the work on how to solve as well as the solutions.
PROBLEMS - SHOW YOUR WORK! 1. A particular security's default risk premium is 4 percent. For all securities, the inflation risk premium is 3 percent and the real interest rate is 2.5 percent. The security's liquidity risk premium is 2 percent and maturity risk premium is 1 percent. The security has no special covenants. What is the security's equilibrium rate of return? __________% 2. Suppose that the current oneyear rate (oneyear spot rate) and expected oneyear Tbill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 3.0%, E(2R1) = 4.0%, E(3R1) = 12.0%, E(4R1) = 14.0%, Using the unbiased expectations theory, what is the current (longterm) rate for fouryear maturity Treasury securities (1R4)? ___________% 3. HydroTech Corp stock was $50 per share a year ago when it was purchased. Since then, it paid a $3 per share dividend. The stock price is currently $52. If you owned 500 shares of HydroTech, what was your percent return for the past year? __________% 4. Portfolio Return Yeartodate, Company X had earned a 2 percent return. During the same time period, Company Y earned 8 percent and Company Z earned 12 percent. If you have a portfolio made up of 60 percent Company X, 30 percent Company Y, and 10 percent Company Z, what is your portfolio return? ___________%Step by Step Solution
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