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Assume there are a bunch of mortgages that are supposed to pay principal payments and interest payments of $2100 during the year are pooled together and sold as securities. These securities have tranches which include I, II, III, and IV. Tranche I is supposed to collect $1000 in principal, tranche II is supposed to collect $500 in principal, tranche III is supposed to collect $300 in principal, and Tranche IV is supposed to collect $200 in principal. Tranche IV has the highest yield assuming that all principal is paid. The annual total interest cost is $100, and this is paid before principal is paid to any of the tranches.
Assume that homeowners default on their mortgages and they only pay $1200 during the year. How much does tranche II collect in principal?
a) $0
b) $100
c) $200
d) $300
e) $400
f) $1200
g) $1400
h) $2100
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost capital of 11%. What is the project's IRR
To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $875, and has a par value of $1,00..
Why or why not? Do you see any potential drawbacks to adjusting the returns to purge microstructure-induced autocorrelation and Write a MATLAB function called compute_overlapping_variance_ratio that takes two inputs, a vector of observations Y and a..
Assume your marketing people have a great plan to boost the unit sales. Unit sales rise to 500,000, but the plan requires your firm to drop the price to $29,000/unit and the marketing will cost your firm $300 million total.
Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,224,349.
Your company has 14 million shares of common stock outstanding. The common stock currently sells for $34 per share and has a beta of 1.2. The market risk premium is 10.5 percent and T-bills are yielding 2.0 percent.
The current cost of equity is 16% and the tax rate is 34%. The company is in the process of issuing $1.5 million of bonds at par that carry a 6% annual coupon. What is the unlevered value of the firm (in millions)
general industries is expected to generate $22 million, $26 million, $29 million, $30 million, and $32 million in free cash flows over the next five years, after which free cash flows are expected to grow at a rate of 3% per year.
Keller currently sells for $48.00 a share, and its dividend is expected to grow at some constant rate g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years
If you deposit $3,500 today into an accoun earning an 11 percent annual rate of return, what would your account be worth in 35 years (assuming no further deposits). In 40 years.
If the returns required by investors are 10 percent, 13 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Capital's after-tax WACC. Assume that the firm's marginal tax rate is 40 percent.
Long run inflation is forecasted to be 3 percent per annum in the U.S and 7 percent in SA. The current spot foreign exchange rate is ZAR/USD = 3.75. Determine the NPV for the project in USD by
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