Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Calculating the risk premium on bonds The text presents a formula where (1 + i) = (1 – p)(1 + i + x) + p(0)
p is the probability the bond does not pay at all (the bond issuer is bankrupt) and has a zero return. i is the nominal policy interest rate. x is the risk premium.
a. If the probability of bankruptcy is zero, what is the rate of interest on the risky bond?
b. Calculate the probability of bankruptcy when the nominal interest rate for a risky borrower is 8% and the nominal policy rate of interest is 3%.
c. Calculate the nominal interest rate for a borrower when the probability of bankruptcy is 1% and the nominal policy rate of interest is 4%.
d. Calculate the nominal interest rate for a borrower when the probability of bankruptcy is 5% and the nominal policy rate of interest is 4%.
e. The formula assumes that payment upon default is zero. In fact, it is often positive. How would you change the formula in this case?
Please share your thoughts on Fund Expenses. Would you be more likely to invest in a level load, front end, or back end load fund? Why? Do you believe the fees in active management are worth it in certain circumstances? Describe when
Prepare a balance sheet using the following information. The business has $12,000 cash, $2,500 in accounts receivable, $22,000 in inventory, and $46,000 in equipment. They have $6,800 in accounts payable, $2,600 in wages payable, $22,000 in mortgage ..
Do the following events INCREASE or DECREASE or have NO EFFECT on net working capital?
Calculate the market value of a firm with total assets of $105 million and $50 million of 10% perpetual debt in the capital structure. The perpetual EBIT is expected to be $9 million and the marginal tax rate is 40%?
Treasury bills are currently paying 5 percent and the inflation rate is 3.2 percent. What is the approximate real rate of interest? What is the exact real rate?
You are scheduled to receive a $480 cash flow in one year, a $780 cash flow in two years, and pay a $380 payment in three years. If interest rates are 9 percent per year, what is the combined present value of these cash flows?
A couple will retire in 50 years; they plan to spend about $26,000 a year in retirement, which should last about 25 years. They believe that they can earn 9% interest on retirement savings. a. If they make annual payments into a savings plan, how muc..
Suppose the initial margin m_0 = 50% and the maintenance margin m_1 = 30%. how much cash do you need in advance at least?
The following information is available about an investment opportunity. Calculate the investment's internal rate of return and its NPV.
The Up and Coming Corporation's common stock has a beta of 1.6. If the risk-free rate is 5 percent and the expected return on the market is 11 percent, what is the company's cost of equity capital?
Consider a stock priced at $30 with a standard deviation of 0.3. The risk-free rate is 0.05. There are put and call options available at exercise prices of 30 and a time to expiration of six months. The calls are priced at $2.89 and the puts cost $2...
which investment (without considering any effect of state and local taxes) would generate the greater after-tax yield?
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd