Hi dear learners; under listed are a listing of short answer, case study and work out questions. Read the questions carefully and write the correct answer below each of the questions. Short answers and language clarity has credit.To answer the questions, you can refer any resource you like, but copy and paste either from one another or any other resource likely disqualify your result. Use your own words for answering. Use examples where necessary. To be returned until June 26, 2020.

Part_I: Short answer questions

1)Why is a dollar today worth more than a dollar one year from now?

2)In the analysis of risk and return, investors are highly concerned with two types of risks. What are they? Discuss which type of risk matters to investors and why.

3)What is the difference between simple interest and compound interest?

4)What are the two components of a total holding period return?

5)Explain the concept of operating and financial leverage. Which of the leverages is associated with capital structure concept and how?

Part_II: Case study questions

1.Given that you know the risk as well as the expected return for two stocks, discuss what process you might utilize to determine which of the two stocks is a better buy? You may assume that the two stocks will be the only assets held in your portfolio.

2.Stocks A, B, and C have expected returns of 15 percent, 15 percent, and 12 percent, respectively, while their standard deviations are 45 percent, 30 percent, and 30 percent, respectively. If you were considering the purchase of each of these stocks as the only holding in your portfolio, then which stock should you choose?

3.Assume that there is an increase in the risk-free rate. What impact would this increase have on the cost of debt? What impact would this have on the cost of equity?

Part_III: Work out questions

A.You just bought a corporate bond at $863.75 today. In five years the bond will mature and you will receive $1,000. What is the rate of return on this bond?

B.Hyundai Motors has a target capital structure of 40 percent debt and 60 percent equity. The yield to maturity on the company's outstanding bonds is 9 percent, and the company's tax rate is 40 percent. Hyundai's CFO has calculated the company's WACC as 9.96 percent. What is the company's cost of common equity?

C.Calculate the after-tax cost of debt under each of the following conditions:

oInterest rate, 13 percent; tax rate, 0 percent

oInterest rate, 13 percent; tax rate, 20 percent

oInterest rate, 13 percent; tax rate, 35 percent

D.Thomas Brothers is expected to pay a $0.50 per share dividend at the end of the year (i.e., D₁=$0.50). The dividend is expected to grow at a constant rate of 7 percent a year. The required rate of return on the stock, k_s, is 15 percent. What is the value per share of the company's stock?

E.Your birthday is coming up, and instead of any presents, your parents promised to give you $1,000 in cash. Since you have a part time job and thus don't need the cash immediately, you decide to invest the money in a bank CD that pays 5.2 percent quarterly for the next two years. How much money can you expect to gain in this period of time?