Question: The stock of Amrep Corporation has a

> What factor or factors make the valuation of common stocks more complicated than the valuation of bonds and preferred stocks?

> Discuss the various stockholder rights.

> Explain the differences between par value, book value, and market value per share of common stock.

> Discuss the reasons why a firm may repurchase its own common stock.

> Does the retained earnings figure on a company’s balance sheet indicate the amount of funds the company has available for current dividends or capital expenditures? Explain fully.

> Under what circumstances will the coefficient of variation of a security’s returns and the standard deviation of that security’s returns give the same relative measure of risk when compared with the risk of another security?

> Define the following terms associated with common stock: a. Nonvoting stock b. Stock split c. Reverse stock split d. Stock dividend e. Book value f. Treasury stock

> International Many Foods, Inc.’s common stock has a beta of 0.9. The stock does not currently pay a dividend, but is expected to appreciate in value from a current price of $15 to $25 in the next five years. The risk-free rate is 6 percent and the market

> Consider again the SML given by Equation 8.18 and shown in Figure 8.15. Assume that the risk-free rate (r ^f) of 6 percent is based on an expected inflation premium of 4 percent. Suppose expected inflation increases by two percentage points to 6 percent.

> Suppose that a portfolio consists of the following stocks: The risk-free rate (r ^f) is 5 percent and the market risk premium (r ^m–r ^f) is 8.8 percent. a. Determine the beta for the portfolio. b. Determine how much General Electri

> Bostonmarket.com stock has an estimated beta of 1.5. The stock pays no dividend and is not expected to pay one for the foreseeable future. The current price of the stock is $50. You expect this price to rise to $60 by the end of the coming year. You beli

> The real rate of return has been estimated to be 2 percent given current economic conditions. The 30-day risk-free rate (annualized) is 5 percent. Twenty-year U.S. government bonds currently yield 8 percent. The yield on 20-year bonds issued by the Fores

> New Castle Company common stock has a beta of 1.50. The stock currently pays a dividend of $3 per share. The risk-free rate is 8 percent, and the market risk premium is expected to be 8.0 percent. The returns from New Castle stock are normally distribute

> Two securities have the following characteristics: Furthermore, the correlation of returns between the securities is -1.0. Determine the risk (standard deviation) of a portfolio consisting of equal proportions of Securities A and B. Security A Secu

> a. Estimate beta for each of the following securities assuming that the standard deviation of returns for the market portfolio (m) is 8.0 percent. b. Based on the Capital Asset Pricing Model, with a risk-free rate (r ^ f) of 7 percent and a market risk

> The current (time zero) price of one share of Farrell Corporation’s common stock is $25. The price is expected to increase by $5 over the coming year. The company is not expected to pay a dividend during the year. The standard deviation of the expected p

> If inflation expectations increase, what would you expect to happen to the returns required by investors in bonds? What would happen to bond prices?

> Three Rivers Investment Company desires to construct a portfolio with a 20 percent expected return. The portfolio is to consist of some combination of Security X and Security Y, which have the following expected returns, standard deviations of returns, a

> The expected return and standard deviation of returns of General Mills common stock over the next year are estimated to be 20 percent and 12 percent, respectively. Assume that the returns are approximately normally distributed. a. Determine the probabi

> Equation 8.9 can be modified to compute the risk of a three-security portfolio as follows: You have decided to invest 40 percent of your wealth in Security A, 30 percent in Security B, and 30 percent in Security C. The following information is availabl

> The stock of Jones Trucking is expected to return 13 percent annually with a standard deviation of 8 percent. The stock of Bush Steel Mills is expected to return 17 percent annually with a standard deviation of 14 percent. The correlation between the ret

> The return on the Tarheel Corporation stock is expected to be 14 percent with a standard deviation of 8 percent. The beta of Tarheel is 0.8. The risk-free rate is 7 percent, and the expected return on the market portfolio is 15 percent. What is the proba

> Security A offers an expected return of 15 percent with a standard deviation of 7 percent. Security B offers an expected return of 9 percent with a standard deviation of 4 percent. The correlation between the returns of A and B is þ0.6. If an investor pu

> The stock of Koch Brickyard Inc., is expected to return 14 percent with a standard deviation of 5 percent. Uptown Potbelly Stove Works’ stock is expected to return 16 percent with a standard deviation of 9 percent. a. If you invest 30 percent of your fu

> Using Equation 8.17, suppose you have computed the required rate of return for the stock of Bulldog Trucking to be 16.6 percent. Given the current stock price, the current dividend rate, and analysts’ projections for future dividend growth, you expect to

> The real rate of interest has been estimated to be 3 percent, and the expected long-term annual inflation rate is 7 percent. a. What is the current risk-free rate of return on one-year Treasury bonds? b. If the yield on 10-year U.S. Treasury bonds is 1

> a. Suppose a U.S. Treasury bill, maturing in one year, can be purchased today for $92,500. Assuming that the security is held until maturity, the investor will receive $100,000 (face amount). Determine the rate of return on this investment.• b. Suppose

> What is the nature of the risk associated with “risk-free” U.S. government bonds?

> The stock of Pizza Hot Inc., a Mexican pizza chain, has an estimated beta of 1.5. Calculate the required rate of return on Pizza Hot’s stock if the SML is estimated as follows: kj =0:06+0:094(j based on: a. An initial inflation expectation of 4 percent

> Given a risk-free rate (r ^f) of 6 percent and a market risk premium (r ^m r ^f) of 8.2 percent, calculate the required rate of return on each of the following stocks, based on the betas given in Table 8.8: a. American

> You have the following information on two securities in which you have invested: a. Which stock is riskier in a portfolio context? Which stock is riskier if you are considering them as individual assets (not part of a portfolio)? b. Compute the expecte

> You are considering investing in two securities, X and Y. The following data are available for the two securities: a. If you invest 40 percent of your funds in Security X and 60 percent in Security Y and if the correlation of returns between X and Y is

> An investor currently has all of his wealth in Treasury bills. He is considering investing one-third of his funds in General Electric, whose beta is 1.30, with the remainder left in Treasury bills. The expected risk-free rate (Treasury bills) is 6 percen

> The expected rate of return for the stock of Cornhusker Enterprises is 20 percent, with a standard deviation of 15 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 9 percent. a. Which st

> The return expected from Project No. 542 is 22 percent. The standard deviation of these returns is 11 percent. If returns from the project are normally distributed, what is the chance that the project will result in a rate of return above 33 percent? Wha

> You have estimated the following probability distributions of expected future returns for Stocks X and Y: a. What is the expected rate of return for Stock X? For Stock Y? b. What is the standard deviation of expected returns for Stock X? For Stock Y?

> Is it possible for investors ever to require a lower rate of return on a company’s equity than on its debt, assuming that the debt is in a junk-bond category of quality?

> What is the primary difference between 20-year bonds issued by the U.S. government and 20-year bonds issued by IBM?

> If the returns from a security were known with certainty, what shape would the probability distribution of returns graph have?

> Why do yield curves sometimes have a downward slope and at other times have an upward slope?

> What factors determine investors’ required rates of return on corporate bonds? common stocks? U.S. government bonds?

> Discuss the general relationship between risk and expected return.

> How is risk defined in a financial sense?

> What is the risk structure of interest rates?

> What is the term structure of interest rates?

> The enclosed area in Figure 8.16 shows all the possible portfolios obtained by combining the given securities in different proportions (that is, the opportunity set). a. Which of the portfolios (A, B, C, D, E, or F) is (are) on the efficient frontier?

> Under what circumstances can the beta concept be used to estimate the rate of return required by investors in a stock? What problems are encountered when using the CAPM?

> How is a security’s beta value computed?

> What variables must be known (or estimated) in applying the capitalization of cash flow method of valuation to a physical or financial asset?

> Define the following terms. a. Risk b. Probability distribution c. Standard deviation d. Required rate of return e. Coefficient of variation f. Efficient portfolio g. Efficient frontier h. Capital market line i. Beta coefficient j. CAPM k. Corre

> What basic features of a lease are necessary to create a landlord-tenant relationship?

> What is a landlord’s lien and how may it be exercised?

> What is the difference between a tenancy at will and a tenancy at sufferance?

> What conditions must be satisfied before a person can acquire property by adverse possession?

> What warranties are contained in a quitclaim deed?

> What are the warranties implicit in a warranty deed?

> How does a license differ from an easement?

> What is the difference between an easement and a profit?

> To what extent may a life tenant use the land in which he or she has a life estate?

> What is a fee simple absolute

> What are goods?

> What two factors are usually considered by the courts in deciding whether property is a fixture?

> What is eminent domain?

> Do landowners always acquire air rights and subsurface rights to their property?

> If an engagement is called off, who should get the engagement ring?

> What effect do lost-property statutes have on the distinction among lost, mislaid, and abandoned property, and treasure trove?

> How is a bailment created?

> What are fungible goods?

> What is the difference between actual delivery and constructive delivery in creating a bailment?

> Are innkeepers and hotel owners strictly liable when their guests lose personal property on the premises?

> How may a bailor satisfy his duty to provide the bailee with goods that are free from hidden de¬fects that could injure the bailee?

> In most situations, when a breach of contract occurs, the injured party has a duty to do what?

> Discuss the two basic duties of a bailee.

> Does the 2005 act adequately balance the interests of creditors and debtors? Why or why not?

> Do bailees have the right to limit their bailment liability?

> What are fungible goods?

> Is it possible to deliver a gift of personal property over the Internet? Explain.

> What is the difference between mislaid, lost and abandoned property?

> How may a gift be delivered to a donee when physical delivery is impossible due to the nature of the gift itself?

> What are the three requirements for an effective gift?

> What is the difference between a tenancy in common and a joint tenancy?

> What is the difference between tangible and intangible personal property?

> What are the two principal types of damages recoverable on a breach of contract?

> A discharged debt is not treated as taxable income. If it were, how would a debtor’s situation be different?

> What sort of defenses may an insurance company raise against payment on a claim?

> What information must be provided by one who is applying for an insurance policy?

> In what circumstances may an insurer cancel a policy?

> How is the effective date of an insurance policy usually determined?

> Who may be insured by a key-person insurance policy?

> Can anyone claim to have an insurable interest in a particular person or property?

> Discuss the concept of risk pooling.

> What is insurance?

> Do the automatic stay rules apply in Chapter 13 cases?

> What are three ways in which performance of a contract may become impossible in an objective sense?

> Can a Chapter 13 proceeding be initiated by involuntary petition?

> Who is eligible for relief under Chapter 13?

> In evaluating a debtor’s petition, what factors should be part of a good faith analysis? Should consideration of the calculation of disposable income play a role? Why or why not?

> What is the essential difference between bankruptcy under Chapter 7 and bankruptcy under Chapter 11?

> How are secured debts handled in a bankruptcy proceeding?

> What powers does a trustee have?