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The ABC Company bond has an annual coupon rate of 5.50%, pays interest semi-annually and has a face value of $1,000. If there are 22 years to maturity and your required rate of return on bonds of this risk level is 6.50%, what is the bonds value to you? (solve for present value and show work with the formula)
Default Risk Premium A Treasury bond that matures in 10 years has a yield of 5%. A 10-year corporate bond has a yield of 7.5%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk premium on the corporate bond?
Suppose that Tan Lotion's common shares sell for $18 per share, are expected to set their next annual dividend at $1.00 per share, and that all future dividends are expected to grow by 7 percent per year, indefinitely. If Tan Lotion faces a flotation..
A firm has targeted a 40% growth in sales this year. Last year's cash as a percent of sales was 15%, accounts receivable 30%, and inventory 35%. What percentage growth in current assets is required to support the growth in sales under the percent-of-..
You have a $6,000,000 portfolio that has a beta of 2.4 to the S&P 500. You have decided you want to hedge this portfolio over the next 12 months. The 13-month S&P 500 futures price is $2300, and the current S&P 500 index value is $2250. What position..
Describe forward, futures and options foreign currency markets, and discuss how they demonstrate arbitrage problems in international finance. Use a minimum of three resources to support your discussion.
What is the maximum level of risk aversion for which the risky portfolio is still preferred to bills?
Digital Organics (DO) has the opportunity to invest $0.93 million now (t = 0) and expects after-tax returns of $530,000 in t = 1 and $630,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity f..
Teder Corporation stock currently sells for $30 per share. The market requires a 13.5 percent return on the firm's stock. If the company maintains a constant 8 percent growth rate in dividends, the most recent dividend per share paid on the stock was..
Cayman Corporation just paid a dividend of $4.00 on its common stock. Expectations for growth in earnings are expected to be unusually high over the next 2 years. As such, Cayman expects its dividend to grow at a rate of 30% over the next 2 years aft..
Cool Manufacturing has an expected EBIT of $89,000 in perpetuity and a tax rate of 35 percent. The firm has $210,000 in outstanding debt at an interest rate of 8.80 percent, and its unlevered cost of capital is 11 percent. What is the value of the fi..
In its most recent financial statements, Newhouse Inc. reported $30 million of net income and $510 million of retained earnings.
Deci-bell inc. is producing new headphones, but first management wants to determine its degree of operating leverage. Deci-Bell Inc. has a base level of sales of $350,200 units. Sales price per unit is $167.65 and variable cost per unit is $69.09. To..
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