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"Suppose Ford sold an issue of bonds with a 15-year maturity, a $1000 per value, a 12% coupon rate, and annual interest payments.
(a) Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 8%. At what price would the bonds sell?
(b) Suppose that, two years after the bonds' issue, the bonds would sell for $883.15. What is the going interest rate?
(c) Today, the closing price of the bond is $786.20. What is the current yield?
You are expecting to receive $300 at the end of each year in years 3, 4, and 5, and then 500 each year at the end of each year in years 10 through 25, inclusive. If the appropriate discount rate is 8.8 percent, for how much would you be able to sell ..
There is expected to be no debt or available cash at the investment horizon.
Assuming the firm goes through with the proposed recapitalization.
Identify the pros and cons of each opportunity. Be sure to discuss the following for each opportunity – plus any other perceived differences.
A Japanese electronics manufacturer is contemplating investing $1 billion (with all of the investment to be made at the outset) in a 10-year investment project in the U.S. The Japanese company is well known in world capital markets and is universally..
An 8 year corporate bond has a yield of 8.7%, which includes a liquidity premium of 0.75%. What is its default risk premium?
Secolo Corporation stock currently sells for $30 per share. The market requires a return of 11.4 percent on the firm’s stock. If the company maintains a constant 3.7 percent growth rate in dividends, what was the most recent dividend per share paid o..
Consider the characteristics of the following three stocks: T& Company, Expected Return = 18%; Standard Deviation = 25% A& Company, Expected Return = 12%; If you can pick only two stocks for your portfolio, which would you pick? Why?
What percentage of the gross price is the investment bank charging The Fitness Studio for underwriting the stock issue?
How many shares of stock should you buy/sell to delta hedge this position?
The CFO of Lenox Industries hired you as a consultant to help estimate its cost of capital. You have obtained the following data: (1) rd = yield on the firm’s bonds = 7.00% and the risk premium over its own debt cost = 4.00%. You were asked to estima..
A 4-year annuity of eight $5,000 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount rate is 6 percent compounded monthly, what is the value of this annuity five years from now? If the di..
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