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Kilgore Natural Gas has a $1,000 par value bond outstanding that pays 14 percent annual interest. The current yield to maturity on such bonds in the market is 11 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Compute the price of the bonds for these maturity dates: (Do not round intermediate calculations. Round your final answers to 2 decimal places. Assume interest payments are annual.)
30 Years Bond Price =
17 Years Bond Price =
3 Year Bond Price =
List 3 ways to take a short or generally defensive position on different asset types or the broader market. Name 2 ways to mitigate investment liquidity risk.
Which one of the following cannot occur if the NPV of an independent project is positive?
A company issues a 20-year, callable bond at par with a(n) 9% annual coupon rate. The bond can be called in three years or any time after that on a coupon payment date. The call price is $110 per $100 of face value. On issue it has a price equal to p..
First Data, and Whirlpool were 8.90 percent, -2.68 percent, and 11.03 percent. What’s your portfolio return?
You’ve just opened a margin account with $18,000 at your local brokerage firm. What is your total dollar return from this investment?
Use the exact form of interest rate parity in calculating the expected spot rates.
Lewis, Inc. expects to start paying dividends at the end of 3 years. The first dividend (D3) is expected to be $2.50, and dividends are expected to grow at a constant rate of 4% thereafter. If the average investor’s required return is 12%, what is th..
Consider the following five hypothetical Treasury securities. What is the implied 1.5 spot rate obtained using bootstrapping? Compare your answer is part (a) to the 1.5 year par rate and explain the difference. Why do we use rates on implied zeros ra..
How much in total dividends did the company pay? What was the company's earnings before tax (EBT)?
The real risk-free rate is 3%. Inflation is expected to be 3% this year, 4% next year, and 3.5% thereafter. The maturity risk premium is estimated to be 0.05 x (t-1), where t= number of years to maturity. What is the yield on a 7-year Treasury note?
Potter Industries has a bond issue outstanding with an annual coupon of 6% and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 9%, what is the value of the bond?
Calculate the expected rate of return and standard deviation for each investment.
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