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Assess today's risk premium on industrial bonds using the Bonds Online Web site. Select the Today's Market section and then choose Corporate Bond Spreads. Use the information in this area to answer the following questions:
What is the risk premium on AA-rated bonds with a 30-year maturity?
What is the risk premium on BBB-rated bonds with a 30-year maturity?
What is the risk premium on CCC-rated bonds with a 30-year maturity?
Given the prevailing economic conditions, which of these three categories of bonds would be the best investment? Explain your choice.
Also, describe the various types and uses of bonds and explain how bond markets are used by institutional investors.
On May 8, 2013, an investor owns 100 Google shares. As indicated in Table 1.3, the share price is about $871 and a December put option with a strike price $820 costs $37.50. The investor is comparing two alternatives to limit downside risk. Discuss t..
An industrial firm can manufacture several lines of pressure washers. The demand for a particular component required for a pressure washer is 120,000 per year. The firm has the following two options: Buy option: A supplier is willing to provide this ..
Perform sensitivity analysis to analyze the effect of expenses on the project’s NPV and IRR. In your analysis, allow costs to vary between $0 and $100,000, in $5,000 increments. Use Goal Seek to find what level of expenses Lewis Industries needs to j..
Examine the credit card loss rates and personal bankruptcy filings in Exhibit 15.4. What might explain the increase in both measures after 1994 in a period when economic growth in the United States was strong and unemployment was low? Given the probl..
Portfolio Weights If you own 250 shares of Air Line Inc at $18.75, 150 shares of BuyRite at $9.7, and 350 shares of Motor City at $45.75, what are the portfolio weights of each stock?
A bondholder owns 15-year government bonds with a $5 million face value and a 6 percent coupon that is paid annually. The bonds are currently priced at $550,018.73 with a yield of 5.034 percent. The bonds have a duration of 10.53 years. If interest r..
Assume that relevant nominal interest rate for this type of instrument is 10%. Determine price of bond. Expected before-tax real interest rate of bond.
A company borrows $81000 at 12% simple interest from State Bank to purchase equipment. State Bank requires the company to make monthly interest-only payments and pay the full $81000 at the end of 5 years. State the monthly interest payment to State B..
Briefly describe the differences among international bond, bank and equity markets. Would you support an MNC that favors financing through bonds issues or would you rather support one that favors financing through stock issues?
The internal rate of return is most reliable when evaluating:
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; What is the NAL for Wildcat? What is..
Suppose you have this cash flow sequence in factor notation: Show the cash flow sequence as a comma separated list starting in time period zero. For example P=2(P|A,i,4) would be shown as:
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