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Individual B buys a bond with a par value of $1, 000 and a coupon rate of 5% where the payments are made annually. The purchase price is $975. It expires in exactly 3 years and the par value will be paid a that time. B is in the 20% tax bracket for capital gains and for interest income. Calculate the amount of taxes B will pay on the interest income and the capital gains for this security over the three year period.
Explain how a credit crisis can lead to a full-blown economic crisis. Explain the similarities between the 1929 Great Crash and the 2008 Credit Crisis. What are the lessons learned from the 2008 Credit Crisis? Please elaborate.
Income Statement: The Fitness Studio, Inc's, 2015 income statement lists the following income and expenses: EBIT=$773,500, interest expense=$100,000, and taxes = $234,500. The firm has no preferred stock outstanding and 100,000 shares of common stock..
Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of..
Heath Foods's bonds have 12 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 9%. They pay interest annually and have a 9% coupon rate. What is their current yield? Round your answer to two decimal places.
Decision trees are a visual representation of the sequential choices that financial decision makers face when making capital budgeting and investment decisions. True or False: Typically the beginning of the project is riskier than later stages.
Zoso is a rental car company that is trying to determine whether to add 25 cars to its fleet. The company fully depreciates all its rental cars over four years using the straight-line method. What is the maximum price that the company should be will..
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $60,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value.
Stephen plans to purchase a car 5 years from now. The car will cost $55,339 at that time. Assume that Stephen can earn 5.16 percent (compounded monthly) on his money. How much should he set aside today for the purchase?
You own six call option contracts on Swift Water Tours stock with a strike price of $17.50 per share and an option premium of $.35 per share. What is the total intrinsic value of these options today if the stock is currently selling for $16.79 a shar..
Use the following information for Taco Swell, Inc., for Problems 25 and 26 (assume the tax rate is 34 percent): 2014 2015 Sales $12,730 $ 14,229 Depreciation 1,827 1,910 Cost of goods sold 4,377 5,178. calculate the cash flow from assets, cash flow t..
Describe how each of the following helps a bank control its credit risk: a. Loan covenants b. Risk rating systems c. Position limits
For a new product, an initial investment of $500,000 is required. The revenues and costs for each of the four years of the product’s life are. The expected residual value of the equipment is 10% of its first cost of $500,000 at the end of the five ye..
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