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A corporation is considering whether to borrow money from a bank or in the bond market. The bank offered an interest rate of 5% to the firm. The bank debt will be collateralized and subject to covenants, and thus, the bank expects a recovery rate of 80% on the debt if the company defaults. The bank demands an expected return of 4.25% on bank debt. If the company issues bonds, the recovery rate on bonds upon default is expected to be 40%. The probability of default is the same for both bank and bond debt. Using these data, estimate the interest rate that the company will pay on its bonds. Assume that bondholders demand the same expected return as the bank.
The bonds make semi-annual payments and currently sell for 105.09% of par. What is the current yield?
The multiplier for a futures contract on the stock-market index is $250. The maturity of the contract is one year, the current level of the index is 700, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.2% per m..
IPO underpricing-What profit do you actually expert? What principle have you illustrated?
Which of the following positions are bullish on the market? I. buying a stock II. writing a put III. buying a call IV. selling a call
What is the company's receivable turnover rate? what is the firm's day sales outstanding (DSO)?
Assume the following par yields for the on-the-run Treasury yield curve. Calculate the spot rate curve from the par yield curve using bootstrapping.
Pearson Brothers recently reported an EBITDA of $13.5 million and net income of $3.9 million. It had $2.0 million of interest expense, and its corporate tax rate was 35%. What was its charge for depreciation and amortization?
What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?
Some major companies live and die by EVA. For example, at General Electric, more capital is allotted only to divisions that pass the EVA threshold, and divisions that regularly flunk are sold off. It’s a simple, but powerful, approach that looks at a..
Alexander Corp. will pay a dividend of $3.10 next year. The company has stated that it will maintain a constant growth rate of 4.75 percent a year forever. If you want a return of 16 percent, how much will you pay for the stock?
A project has an initial requirement of $198,955 for new equipment and $10,880 for net working capital. What is the project's NPV if the tax rate is 37%?
what is the coupon rate of these bonds, expressed annually?
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