Question
BGA wishes to invest funds and has several options available to it. The investment options are X, Y and Z. All three of these options
BGA wishes to invest funds and has several options available to it. The investment options are X, Y and Z. All three of these options have equal risk. The interest rates (EAR) for these options are given in the spreadsheet. What is the EAR of the investment option BGA should choose?
| Bega Cheese (BGA) | |
| Loan payment per quarter | $2,400.00 |
| Operating revenue (in millions)2 | $2.07 |
| Annual growth in revenue | 15% |
| Property price | $35,00,000 |
| Investment X (p.a.) | 4.74% |
| (compounding frequency) | quarterly |
| Investment Y (p.a.) | 4.45% |
| (compounding frequency)1 | daily |
| Investment Z (p.a.) | 4.25% |
| (compounding frequency) | semi-annually |
| Part e. annual coupon rate | 5.00% |
| Part e. Current bond price | $1,217.25 |
| Part f. annual coupon rate | 7.00% |
| Part f. market required return | 5.95% |
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Financial Management Principles and Application
Authors: Arthur J. Keown, J. William Petty, David F. Scott, Jr.
10th edition
536514119, 536514110, 978-0536514110
