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##### Expected interest rate. The real risk free rate is...

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Solution

**Question**

Expected interest rate. The real risk free rate is 3 percent. Inflation is expected to be 2 percent this year and 4 percent during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2 years treasury securities? What is the yield on 3 years Treasury securities?,Iken Berry Farms has $5 million in current assets, $3 million in current liabilities, and its initial inventory level is $1 million. The company plans to increase its inventory, funded by additional short-term debt (notes payable). Assume that the value of the remaining current assets will not change. The company's bond covenants require a current ratio greater than or equal to 1.5. How much inventory can be purchased before the covenants are violated?,Last year Southern Chemicals had sales of $200,000, assets of $125,000, a profit margin of 5.15%, and an equity multiplier of 1.85. The CFO believes that the company could reduce its assets by $25,000 without affecting either sales or costs. Had it reduced its assets in this amount, and had the debt ratio, sales, and costs remained constant, by how much would the ROE have changed?

Paper#11959 | Written in 18-Jul-2015

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