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A risk manager is analyzing a long-dated bond that matures in 25 years and pays 8% coupon. He is told that the modified duration is 11.65 years and the bond convexity is 165. The bond is currently trading at 8% yield to maturity. Assuming a par value of $1000, should the yield to maturity increase by 1.5%, compute the expected bond price using both duration and convexity adjustments.
Given that exercise price is $75, call option premium is $3.5, put option premium is $ 1, both options have a time to maturity of 32 days, and the riskfree rate is 5o/o p.a., please show how you could create a "synthetic stock" that could serve as th..
An ordinary annuity has an interest rate of 10% and a future value of 80.00. What would be the future value of this same annuity, if it were an annuity due instead of a regular annuity? The future value of this annuity due is $
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 16% and a standard deviation of return of 20.0%. Stock B has an expected return of 12% and a standard deviation of return of 5%. The expected ret..
Dinero Bank offers you a $60,000, five-year term loan at 7.5 percent annual interest. What will your annual loan payment be? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
You recently graduated from college with a business degree and accepted a position at a major corporation earning more than you could ever dreamed. Make five lists of the financial service firms that could provide you each of these services.
Grandview Clinic has fixed costs of $2.1 million and an average variable cost rate of $17 per visit. Its sole payer, an HMO, has proposed an annual capitation payment of $163 for each of its 18193 members. Past experience indicates the population ser..
Messman Manufacturing will issue common stock to the public for $40. The expected dividend and growth in dividends are $2.75 per share and 5%, respectively. If the flotation cost is 14% of the issue's gross proceeds, what is the cost of external equi..
The stock of Bruin, Inc., has an expected return of 18 percent and a standard deviation of 32 percent. The stock of Wildcat Co. has an expected return of 10 percent and a standard deviation of 36 percent. The correlation between the two stocks is .36..
When Texaco purchased Getty Oil, many financial analysts felt that the deal made sense because it increased Texaco's market share and expanded its shrinking oil reserves. This merger exemplified the belief among the natural resource companies that bu..
Protective covenants and An annuity:
A borrower is approved for a $80000 mortgage loan at 12% interest with monthly payments over 30 years. The borrower is required to pay 3.5 points. Assume the borrower repays the loan after 5 years. What is the effective borrowing cost?
What is the present value of an investment that will pay you $417 at the end of the 1 year, $501 at the end of the 4, and $368 at the end of the 6 year. Assume the discount rate is 8%.
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