Bernie ebbers, the ceo of worldcom, a major telecommunications company, was having personal financial troubles. ebbers pledged a large stake of his worldcom stock as security for some personal loans. as the price of worldcom stock sank, ebbers' bankers threatened to sell his stock in order to protect their loans. to avoid having his stock sold, ebbers asked the board of directors of worldcom to loan him nearly $400 million of corporate assets at 2.5% interest to pay off his bankers. the board agreed to lend him the money. comment on the decision of the board of directors in this situation.

Rate of return douglas keel, a financial analyst for orange industries, wishes to estimate the rate of return for two similar-risk investments, x and y. douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns. a year earlier, investment x had a market value of $27 comma 000; and investment y had a market value of $46 comma 000. during the year, investment x generated cash flow of $2 comma 025 and investment y generated cash flow of $ 6 comma 770. the current market values of investments x and y are $28 comma 582 and $46 comma 000, respectively. a. calculate the expected rate of return on investments x and y using the most recent year's data. b. assuming that the two investments are equally risky, which one should douglas recommend? why?