Questions from Corporate Finance

Q: A stock is currently priced at $35. A call option

A stock is currently priced at $35. A call option with an expiration of one year has an exercise price of $50. The risk-free rate is 7 percent per year, compounded continuously, and the standard devia...

Q: Using information from the previous chapter about capital market history, determine

Using information from the previous chapter about capital market history, determine the return on a portfolio that is equally invested in large company stocks and long-term government bonds. What is t...

Q: Your broker commented that well-managed firms are better investments than

Your broker commented that well-managed firms are better investments than poorly managed firms. As evidence your broker cited a recent study examining 100 small manufacturing firms that eight years ea...

Q: A famous economist just announced in The Wall Street Journal his findings

A famous economist just announced in The Wall Street Journal his findings that the recession is over and the economy is again entering an expansion. Assume market efficiency. Can you profit from inves...

Q: Draw up an income statement and balance sheet for this company for

Draw up an income statement and balance sheet for this company for 2011 and 2012.

Q: For 2012, calculate the cash flow from assets, cash flow

For 2012, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders.

Q: The efficient market hypothesis implies that all mutual funds should obtain the

The efficient market hypothesis implies that all mutual funds should obtain the same expected risk-adjusted returns. Therefore, we can simply pick mutual funds at random. Is this statement true or fal...

Q: Assume that markets are efficient. During a trading day American Golf

Assume that markets are efficient. During a trading day American Golf Inc. announces that it has lost a contract for a large golfing project that, prior to the news, it was widely believed to have sec...

Q: In the previous problem, what is the probability that the return

In the previous problem, what is the probability that the return is less than 2100 percent? (Think.) What are the implications for the distribution of returns?

Q: Some people argue that the efficient market hypothesis cannot explain the 1987

Some people argue that the efficient market hypothesis cannot explain the 1987 market crash or the high price-to-earnings ratios of Internet stocks during the late 1990s. What alternative hypothesis i...