Quiz 5 - FIN 360 Quiz #5 Name: _Jeremy Pflug_ 1. Based on...

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FIN 360 Quiz #5 Name: _Jeremy Pflug _____________________ 1. Based on the following information, calculate the expected rate of return on a real estate mutual fund. State of Economy Probability of State of Economy Mutual Fund’s Rate of Return If State Occurs Recession 0.2 -7% Normal 0.55 13% Boom 0.25 30% Expected rate of return = 0.1325 2. Using the expectations hypothesis for the term structure of interest rates, what is the expected yield for securities with maturity of two years? If the expected yield for securities with maturity of three years is 7.8%, what is the expected yield on 1-year T-bill at beginning of year 3? Current yield on 1-year T-bill at beginning of year 1 7.2% Expected yield on 1-year T-bill at beginning of year 2 7.8% Expected yield on 1-year T-bill at beginning of year 3 ? Expected yield for 3 rd year = 8.4% 3. Christensen & Assoc. is developing an asset financing plan. Christensen has $500,000 in current assets, of which 15% are permanent, and $700,000 in fixed assets. The current long-term rate is 11%, and the current short-term rate is 8.5%. Christensen's tax rate is 40%.
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Quiz 5 - FIN 360 Quiz #5 Name: _Jeremy Pflug_ 1. Based on...

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