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Use the following information to answer the next 4 questions.
A bond is scheduled to mature in two years. Its coupon rate is 9 percent with interest paid annually. This $1,000 par value bond carries a yield to maturity of 10 percent.
1) What is the bond's price?
2) What is the duration of the bond?
3) Calculate the percentage change in this bond's price if interest rates on comparable risk securities decline to 7 percent.
4) Calculate the percentage change in this bond's price if interest rates on comparable risk securities increase to 11 percent.
Calculate Touring Enterprises' weighted average cost of capital (WACC). Work as follows: first, compute the after-tax cost of debt, then compute the cost of equity. Cite both formulas, and show all your work.
Cindy borrows 13,500 for 12 years at an annual effective interest rate of i. She accumulates the amount necessary to repay the loan by a sinking fund. Cindy makes 12 payments of P at the end of each year, which includes payment on the loan at an annu..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.97 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
Describe the fundamental concepts of investing covering basic supply and demand analysis, economic life cycle theory, time value of money, risk and return, market liquidity, diversification and asset allocation in an investment portfolio where app..
Evaluate the alternative capital investments. Justify your answers to the following questions with full explanations. You will need to calculate the net present value, internal rate of return and payback period for each alternative
"Baldwin's Traditional product Basket finished 2019 with an awareness of 72%. One-third of Basket's existing awareness is lost every year. What is the minimum that Basket s product manager should spend in promotion to earn have an awareness level of ..
XYZ Hospital has two options in how to purchase some EDP equipment with a list price of $5m. Option one is a 15% reduction in the price of the equipment but the hospital has to pay the full amount at the time of purchase. What if the opportunity cost..
What is the market value of a zero coupon bond with 5 years to maturity? The bond was originally sold with a yield to maturity equal to 11 percent, but the market rate today is 9 percent.
What is Netflix’s long-run objective? How does Netflix plan to achieve its long-run objective? How would you assess Netflix’s business model. Why does McCarthy use a subscriber model to forecast Netflix’s future cash flow requirements? What are the b..
During the Vietnam War years the U.S. official reserves transaction balance was negative and U.S. reserve assets declined. With the fixed exchange rate system during those years, the United States was able to run a deficit on current account because ..
Lee purchased a stock one year ago for $27. The stock is now worth $34, and the total return to Lee for owning the stock was 0.37. What is the dollar amount of dividends that he received for owning the stock during the year?
Krisle and Kringle's debt-to-total assets ratio is 0.445 (i.e., debt ratio = 44.5%). What is the company’s debt- to-equity ratio? (Enter answer as a ratio rounded to 2 decimal places – that is, do not convert to a percent; for example, enter 80/35 = ..
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