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Question 1 - a) Your financial advisor has given you the following advice. A great Investment for your $10,000,000 should be in long term bonds offering an interest return of 20/25% per annum whereas short term bonds are only offering a low interest rate. Is the financial advice good? Give your recommendation and reasoning in no more than 350 words.
b) Calculate the yield to maturity of a coupon bond face value $10, 000, purchased for $8000.00 with an interest rate of 8% per annum that has 25 years to maturity and sold at 15 years.
Question 2 - During certain economic crises we have witnessed stock prices soaring prior to the crises (1980, 2008) taking hold and prices substantially declining as recessionary influences occur, causing a significant drop in stock prices. Economists would state that bubbles in market prices had been created prior to the crises. In 350 words max. Describe how governments can utilize an economic model to prick such stock market bubbles to normalize stock market price and assist in the development of fiscal policy. Describe the model and give examples.
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
Accounting problems, Draw a detailed timeline incorporating the dividends, calculate the exact Payback Period b) the discounted Payback Period. the IRR, the NPV, the Profitability Index.
Term Structure of Interest Rates
Write a report on Internal Controls
Prepare the bank reconciliation for company.
Create a cost-benefit analysis to evaluate the project
Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR
Distinguish between liquidity and profitability.
Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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