1. Suppose your company has an equity beta of 2. The market risk premium is expected to be 8,5% and the current risk-free rate is 10%. And we have used analysts estimates to determine that the market believes our dividends will grow at 8% per year and our last dividend was R4. Our shares are currently selling for R20,25. What is our cost of equity?
2. At an interest rate of 10% and using the rule of 72, how long will it take to double the value of a lump sum invested today? How long will it take after that until the account grows to four times the initial investment? Given the power of compounding, shouldn't it take less time for the money to double the second time?
3. You buy three December oil futures contracts when the futures price is $42 per barrel. Each contract is on 1000 barrels of oil and the initial margin per contract that you provide is $2,000. The maintenance margin per contract is $1,500. During the next day the futures price rises to $42.25 per barrel. What is the balance of your margin account at the end of the day assuming no cash flows?