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Suppose a corporate bond that reaches maturity on 07/01/2036 is trading today (2/15/2021) for $763. The bond certificate indicates that the stated coupon rate for this bond is 5% and that the coupon payments are to be made semiannually.
-Compute YTM of the bond. Clearly state your Excel / Calculator inputs.
-Suppose the bond's credit rating is BB. Would you use YTM as a reasonable estimate of the investment rate of return on the bond? Explain your answer.
-If your answer to b) is "no", give two alternative estimates of the investment return on the bond. Assume that the risk free-rate is 2.5% and market expected rate of return is 8%. Using recession estimate for probability of default estimate beta of the bond implied by the value of YTM you computed in b)
Slow? 'n Steady,? Inc., has a stock price of $32?, will pay a dividend next year of $3.30?, and has expected dividend growth of 1.6% per year.
What types of instruments should Elizabeth include in the international portfolio? How risk is assessed using the security market line? What is the purpose of diversification stratagems?
A bond has just been issued with 30 warrants attached. The bonds have a 25 year maturity and an annual coupon of 7%, and they were issued at their $1,000.
If Vtech offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Nissin Steel
What difficulties might come up in actual applications of the various criteria we discussed in this unit? Which criterion will be easiest to implement in actual applications? The most difficult? Provide elaborate examples to support your reasoning..
Would this change in yields be a good thing or not if you purchased the bond one year earlier at the price you calculated in (a) above? Explain. How does this example relate to interest-rate risk?
a stock is expected to pay a dividend of 0.75 at the end of the year.nbspthe required rate of return is rs 10.5 and
Consider investing in machinery that costs $ 1000 and generates in one year $ 1300, $ 1,100 or $ 900 with equal probability.
You decide to buy a new stereo system for $4500 and agree to pay for it in 48 equal monthly payments at 18% annual interest compounded monthly.
Compute the price of the stock (P0). (Do not round intermediate calculations. Round your answer to 2 decimal places.)
The 10-year treasury is at 4%. The risk premium for Asset 'A' is 6%. What is the risk premium for Asset 'B'?
An insurance agent is trying to sell you an? immediate-retirement annuity, which for a single amount paid today will provide you with ? $7,100
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