Question 1: When analyzing a company, what is "benchmarking" and what are advantages and disadvantages of using this technique?
Disadvantages:
Advantages:
Question 2: What is mortgage securitization and how has it affected our economy?
Question 3: You want to have $750,000 in your retirement fund when you retire in 30 years. How much must you invest each month if you expect to earn an 8% annual return, compounded annually?
Question 4: Assuming you meet your goal in the above question and have $750,000 when you retire, what is the maximum that you can withdraw each year, if you anticipate living 25 years during retirement and earning 6% annually?
Question 5: Why is daily compounding better than annual compounding?
Question 6: An investment will pay $500/year for 5 years, then $1,000/year for the next 6 years. At a 6% return, what is today's value of this investment?
Question 7: An investment will return $100/year forever. If you desire an 8% return, what is the maximum price you would pay for this investment?
Question 8: In the above problem, what would cause someone to want a 6% return, while someone else might want a 7% return?
Question 9: What would be the price of a 9%, 10-year corporate bond, sold to yield 7%? Assume interest is paid annually.
Question 10: A stock has a beta of 1.3. The expected return on the market is 10% and the risk-free rate is 3%. What is the required rate of return on the stock?
Question 11: What type of risk do coupon bonds have that zero-coupon bonds do not have? Explain your answer.
Question 12: In our current economic situation, investors tend to be more conservative. How does this affect the Security Market Line and security prices?
Question 13: What concerns exist regarding beta and the CAPM?
Question 14: Please explain the 5 determinants of the market (or "quoted" or "nominal" ) interest rate.
Question 15: Please explain inflation's impact on bond prices, all else held constant.