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Advanced Financial Management Homework
Your broker is offering you two bonds issued by two U.S. companies. One bond has an AA credit rating and the other has a BB rating from Standard and Poor's. Both bonds have a par value of $1,000, a coupon rate of 10%, and a maturity of 10 years. The required rate of return by investors is 8% for AA-rated bonds and 12% for BB-rated bonds. Please answer the following questions.
1) Explain the purpose of credit ratings.
2) Explain why the required rate of return is higher for BB-rated bonds than for AA-rated bonds.
3) Calculate the price of each bond, assuming coupons are paid annually.
4) Recalculate the price of each bond, assuming coupons are paid semi-annually.
Your analysis of how followers can influence the effectiveness or ineffectiveness of leaders Hint: Your analysis should consider how the "followers" empower or enable the leader's behaviors (for good or bad).
80/20 analysis can best be performed via a. The most important tool for evaluating and improving processes is called
Assuming that other factors remain constant, which pays a higher return to the stockholder: common or preferred stock?
Casello Mowing & Landscaping's year-end 2015 balance sheet lists current assets of $435,700, fixed assets of $550,300, current liabilities of $417,100, and long-term debt of $315,500. Calculate Casello’s total stockholders’ equity.
You manage an equity fund with an expected risk premium of 10% and a standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. Wh..
Consider a four-month put futures option with a strike price of 50 when the risk-free interest rate is 10% per annum. The current futures price is 47.- What is a lower bound for the value of the futures option.
What is the primary goal of financial management? The market price of a company's common shares will fall if any of the following occur EXCEPT.
Stock in Country Road Industries has a beta of 1.07. The market risk premium is 8 percent, and T-bills are currently yielding 4 percent. The company's most recent dividend was $1.8 per share, and dividends are expected to grow at a 5 percent annual r..
The firm is considering sellings bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity will increase to 11% to reflect the increased risk. Bonds can be sol..
How would you set up a cost-benefit analysis of a program to reduce air pollution in a city? Indicate the items you would include as costs and benefits, and discuss the problems encountered in measuring these benefits and costs.
National Advertising just paid a dividend of Do = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.7, the required return on the market is 10.50%, and the risk-free rat..
The FTSE 100 is an index of the 100 largest market capitalization stocks traded on the London Stock Exchange. You think that 100 stocks are too much to keep up with, so you want to drop that number to 75. By doing this, what is the percentage drop in..
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