Project Description:

20. in the january 16, 2008 edition of the wall street journal, looking at the stock transactions on the new york stock exchange, the price of a share of mcdonald's stock was: $53.67. you buy the stock. unfortunately this gets you thinking and you're hungry. (i know, what does this last bit of information have to do with finance? trust me - read on. fyi, this is obviously not a test bank question.) you buy a big mac for $2.79. considering these two transactions (the stock and the big mac in that order), they are examples of :

a. a secondary and a primary market transaction

b. two primary market transactions

c. two secondary market transactions

d. really bad transactions! the stock was overpriced and have you ever looked at how much fat is in a big mac?

below are three line items from a corporation's income statement. select the correct line to use and compute the federal tax.

sales: $335,000

cost of goods sold: $225,000

net profit before tax: $ 82,000

problem 2.4. according to the may 19th edition of the wsj, 6 month cds were yielding 3.45% (nominal rate of interest). if risk were considered to be 0 (zero) and inflation was expected to average 3% for the next two years, what should one conclude the real rate of interest to be?
problem 2.5. the acme bank and storm dood company (good old "ab&sdc") is trying to determine what rate of interest they should pay on the new 6 month cds they are trying to get customers to buy. looking at the wsj here's some interest rates they found:

prime: 6%; libor: 3.25%; fed funds: 3%; 10 month t-note: 4%; 3 month t-bill 2.8%.

believe it or not, ab&sdc has a rather shaky reputation - so much so knowledgeable investors would require an additional 8% to buy acme's cds to make up for their high risk of defalut (ignor maturity and liquidity issues).

given the above, what nominal rate of interest must acme's cds
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