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Lycan, Inc., has 8.6 percent coupon bonds on the market that have 9 years left to maturity. The bonds make annual payments. Required: If the YTM on these bonds is 10.6 percent, what is the current bond price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Current bond price $
The management of Erion Corporation is considering the purchase of an automated molding machine that would cost $280,534, would have a useful life of 5 years, and would have no terminal (salvage) value. The automated molding machine would result in c..
You borrowed $20,000 today from your uncle to finance your college education. Your uncle is very flexible in your repayment plan, but he will charge an 8% interest compounded annually for any unpaid balance. Suppose your payment plan is as follows
What is the present value of $3,525 per year, at a discount rate of 10 percent, if the first payment is received 7 years from now and the last payment is received 25 years from now?
Warner Motors’ stock is trading at $20 a share. Call options that expire in three months with a strike price of $20 sell for $1.50. Which of the following will occur if the stock price increases 10%, to $22 a share?
Atlantis Fisheries issues zero coupon bonds on the market at a price of $529 per bond. Each bond has a face value of $1,000 payable at maturity in 16 years. It is callable in 8 years at a call price of $650. Using semi annual compounding, what is the..
A 10 year, 12% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that the bond has just been issued), 1. What is the bonds yield to maturity? 2. What is the bonds ..
A firm has been able to manage its capital requirements in tune with the “pendulum effect”. It has just issued more debt to finance its latest project. What would be the next thing the firm will/should do?
If 6% coupon three year Commonwealth bond Futures contracts are currently trading at a price of 95.505, how many contracts does the portfolio manager need to buy/sell to hedge the portfolio? Explain the reasons why you think this may be an incompl..
The stock of Alpha Company has an expected return of 16.25% and a beta of 1.35, and Gamma Company stock has an expected return of 10.50% and a beta of X. The beta of a portfolio P is 1.05. The portfolio P consists of 40% of the investment in Alpha an..
A. Butcher Timber Company hired your consulting firm to help them estimate the cost of equity. The yield on the firm's bonds is 10.50%, and your firm's economists believe that the cost of equity can be estimated using a risk premium of 3.85% over a f..
You are considering investing $1,500 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 4..
Quick Computing currently sells 10 million computer chips each year at a price of $20 per chip. It is about to introduce a new chip, and it forecasts annual sales of 12 million of these improved chips at a price of $25 each. What is the proper cash f..
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