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Today is January 1, 2009 and you are considering purchasing an outstanding bond that was issued on January 1, 2007. It has a 9.5% annual coupon and originally had a 30-year maturity. (They mature on December 31, 2036.) The bonds can be called for 5 years from original issue date at a premium of $1,090. Interest rates have declined and the bonds are currently selling for 116.575% of par or $1,165.75. Calculate the YTM and the YTC.
You have a chance to buy an annuity that pays $10,000 at the beginning of each year for 10 years. You could earn 5.75% on your money in other investments with equal risk. What is the most you should pay for the annuity?
Lisa Taylor is considering whether she should invest some extra money in a mutual fund or an ETF. Explain the key factors that should influence her decision.
General price inflation is estimated to be 3% for the next 5 years, 5% the 5 years after that, and 8% the following 5 years. If you invest $10,000 at 10% for those 15 years, what is the future worth of your investment in actual dollars at that time a..
A company issues debentures worth Rs. 100 crore and pays on interest of Rs. 10 crore at the end of 1year. What is the actual cost of debt if the prevailing tax rate is 40%?
Suppose you have this cash flow sequence in factor notation: Show the cash flow sequence as a comma separated list starting in time period zero. For example P=2(P|A,i,4) would be shown as:
An interest rate is 11.75% per annum expressed with continuous compounding. What is the equivalent rate with semiannual compounding? (margin of error: +/- 0.01%)
Bridget Morrow is a sophomore at a state college and is running out of money. Wanting to continue her education, Bridget is considering a student loan. Explain her options. How can she best to minimize her Byron cost and maximize her flexibility?
You’ve just opened a margin account with $15,000 at your local brokerage firm. You instruct your broker to purchase 700 shares of Landon Golf stock, which currently sells for $53 per share. What is your total dollar return from this investment? What ..
Bill Dukes has $100,000 invested in a 2-stock portfolio. $35,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.50 and Y's beta is 0.70. What is the portfolio's beta?
You want to buy a car, and a local bank will lend you $30,00. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 10% with interest paid monthly. what will be the monthly loan payment? What will be the loa..
Goodwin Technologies, a relatively new company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. "Investors prefer the deferred tax liability that ca..
An investor has two bonds in her portfolio that have a face value of $1000 and pay a 10% annual coupon. Bond A matures in 15 years, while Bond B matures in 1 year. Why does the longer-term bond price vary more than the price of the shorter-term bon..
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