Economics Answers

You uncle heard that real estate investment could yield remarkable return for investor, and he told you that he is offered a mortgage loan of RM 450, 000 with a rate of 4.5% by Bank A to purchase a double-storey terrace house in Semenyih, the loan is scheduled to be repaid in 35 years with a fixed monthly payment. Use the knowledge that you learned in Finance class,

a.               Calculate the monthly fixed payment to the bank.

b.              Use an amortization table to explain to your uncle the total interest rate that he is going to pay to the bank if he decides to accept the loan.

You planned to buy a stock of company A, given the following information of the stock:

i. Beta of the stock: 1.5

ii. 3 months treasury bill yield: 3%

iii. Market return: 12%

a.               Calculate your required rate of return for the stock?          

b.              Assuming the stock price paid RM 2 dividend last period, and expected to grow at 8 % for 4 years, and a constant rate of 4% after that, what is the expected stock price that you will buy the stock in order to earn your required return?          

3.  The table below shows the weekly relationship between output and number of workers for a factory with a fixed size of plant. P= 10$: w=100$

Number of Workers

Output

0

  0

1

 50

2

110

3

300

4

450

5

590

6

665

7

700

8

725

9

710

10 

705

a.   Calculate the marginal product of labor.

b.   At what point does diminishing returns set in?

c.   Calculate the average product of labor.

d.  Find out optimum level of variable input usage 

Given the end-of-month prices for stock X for January 2020 through June 2020,

Month End-of-Month Price

January 2020 15.25

February 2020 16.10

March 2020 16.20

April 2020 15.80

May 2020 15.85

June 2020 16.30

calculate

a.        Monthly holding-period return

b.              Average Return

c.               Standard Deviation

Given the following information for Company A, find the WACC. Assume the company’s tax rate is 21%

i.                Debt: 15,000 bonds selling for RM 1080, with a Yield To Maturity 5%

ii.              Common Stock: 500,000 shares outstanding, selling for RM 50 per share, the beta is 1.09

iii.            Preferred stock: 30,000 shares, paying fixed RM 5 dividend per share, selling at RM 60 per stock

The market risk - free rate is at 3.2% with 7% market risk premium.

Before the Inclusion of Corporate Tax explain why M & M Proposition II suggested that capital structure of a firm does not affect the cost of capital of the firm?

Explain the following (with Example)

a. Interest Rate Parity

b. Purchasing Power Parity

As the Chief Financial Controller, what are the key factors or constraints that you should consider when making decisions on dividend pay out policy?

Suppose the short run productiin function can be represented by Q=60,000L²-1000L^3. then, determine

A) the level labor employement that maximizes the level of output

B) the level of employement that maximizes APL and the maximum APL

What is the average total cost of producing 40 units per day having cost(dollar per unit) of 1-8, and output (units per day) of 10-50. With the marginal cost on 40, average cost of 50, and the average total cost just in between these two.