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Asset backed securities (ABS) are relatively safe investments because
A. because the pool of assets backing the securities is often much larger than the bond issue.
B. Because the debt pools are highly diversified
C. because the loans in the pool are collateralized with valuable assets such as cars adn trucks
D. they are collateralized only with the highest quality loans.
The firm has bonds outstanding that mature in four years. The par value of each bond is $1000, the coupon rate is 8%, paid annually, and the current price is $988. The firm’s tax rate is 40%. What is the debt holder’s required rate of return?
Coogly has outstanding preferred stock That pays a dividend of $4 per share and sells for $82 per share, with a floatation cost of $6 per share. What is the component cost for Coogly's preferred stock? What are the advantages and disadvantages of usi..
Quick Computing currently sells 16 million computer chips each year at a price of $30 per chip. It is about to introduce a new chip, and it forecasts annual sales of 18 million of these improved chips at a price of $38 each. What is the proper cash f..
At age 23?, someone sets up an IRA? (individual retirement? account) with an APR of 55?%. At the end of each month he deposits ?$50 in the account. How much will the IRA contain when he retires at age? 65? Compare that amount to the total deposits ma..
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Goodwin Technologies, a relatively new company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. "Investors prefer the deferred tax liability that ca..
Christina purchased 200 shares of stock at a price of $62.30 a share and sold them for $70.25 a share. She also received $148 in dividends. If the inflation rate was 4.2 percent, What was her approximate real rate of return on this investment? Over a..
The liability of those who own a corporation is limited to their investment, while proprietors and general partners have unlimited liability for the obligations of their business. Explain what relevance this has for risk management.
Florida Car Wash is considering a new project whose data are shown below. The equipment to be used has a 3-year tax life, would be depreciated on a straight-line basis over the project's 3-year life, and would have a zero salvage value after Year 3. ..
The treasurer of a large corporation wants to invest $44 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 3.56 percent; that is, the EAR for this investment is 3.56 per..
If Treasury bills are currently paying 6.45 percent and the inflation rate is 1.4 percent, what is the approximate and the exact real rate of interest?
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