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1. Assuming its yield to maturity increases from 7% to 8% with maturity unchanged. Calculate the predicted price using modified duration rule, and the percentage error of this rule.
2. A bond has maturity of 7 years and pays a 7% coupon rate (with coupon paid annually).The bond sells at par value.
(1) Calculate the duration and convexity of the bond.
Winnebagel Corp. currently sells 19,000 motor homes per year at $65,000 each, and 6,000 luxury motor coaches per year at $105,000 each. What is the amount to use as the annual sales figure when evaluating the project? Why?
A fast-growing firm recently paid a dividend of $0.85 per share. The dividend is expected to increase at a 15 percent rate for the next three years. Afterwards, a more stable 10 percent growth rate can be assumed. If an 11 percent discount rate is ap..
Mimi Meow is thinking about expanding to another location which they expect will earn an IRR of 10%. Assume that their capital structure consists of 50% common stock, 20% preferred stock, and 30% debt. Further, analysts predict that their future cost..
Bond was recently quoted at 98. Its face is $1,000 and its coupon is 5%. It matures in 15 years. Should you buy the bond if your discount rate is 6%? Why/why not? If your discount rate is 4%, should you buy the above bond? Explain.
Given the following information about Weber's Online Grocery, what is the times interest earn (TIE)?
Assume that the S&P 500 composite index is 995.50. This means that a) the average stock in the index is selling for $99.55 b)an investor would have to pay $995.50 to purchase one share of each of the stocks represented in the index c)the market value..
Identify what the sources of costs might be. Actual costings are not part of this exercise. Always be on the lookout for the hidden costs that can turn an apparent saving into an actual loss.
Which stock would be preferable to an investor with strong risk appetite.
Cal Lury owes $29,000 now. A lender will carry the debt for eight more years at 9 percent interest. What will his annual payment be?
Think about the non-tax-related differences between share repurchases and dividends. Describe the firms in which each difference would be relatively more important.
What do you know for certain about the balances in their accounts at the end of the 25 months?
Suppose Baa-rated bonds currently yield 7.1%, while Aa-rated bonds yield 5.1%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.0%. What would happen to the confidence index?
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