Today is T=0. You borrow $300,000 today at a rate of interest of 5%. You agree to
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- Today is T=0. You borrow $300,000 today at a rate of interest of 5%. You agree to repay the loan in 6 equal, annual installments. The first payment is to be made at T=1. What is the amount of the principal reduction associated with the third payment?
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- Today is T=0. A company paid a dividend of $4.00 yesterday. Dividends are expected to grow at a rate of 8% for three years, 7% for one year and then at a rate of 6%, forever. The required return is 12% and is never expected to change. Estimate the equilibrium price of a share of stock at T=0. PROVE YOUR ANSWER
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- Today is T=0. A bond has an 8% coupon rate, annual payments, and 10 years until maturity. If the bond sells for $1,1472017 what is your capital gain yield between T=6 and T=7.
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