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It is now January 1, 2016, and you are considering the purchase of an outstanding bond that was issued on January 1, 2014. It has a 7.5% annual coupon and had a 30-year original maturity. (It matures on December 31, 2043.)
There is 5 years of call protection (until December 31, 2018), after which time it can be called at 109-that is, at 109% of par, or $1,090.
Interest rates have declined since it was issued, and it is now selling at 119.575% of par, or $1,195.75.
What is the yield to maturity? Round your answer to two decimal places.
What is the yield to call? Round your answer to two decimal places.
Suppose a party holds a contract to purchase 100,000 euros in 36 days at a rate of $1.31. The spot rate for euros is $1.28. The U. S. interest rate is 1.23% and the euro interest rate is 1.51%. What is the value of the contract?
At year-end 2015, Wallace Landscaping’s total assets were $1.9 million and its accounts payable were $390,000. Sales, which in 2015 were $2.1 million, are expected to increase by 20% in 2016. How much new long-term debt financing will be needed in 20..
What is the present value? (PV) of an investment that will pay $600 in one? year's time, and $600 every year after? that, when the interest rate is 5?%?
David Ortiz Motors has a target capital structure of 30% debt and 70% equity. The yield to maturity on the company's outstanding bonds is 11%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.61%. What is the com..
It is often stated that a stock index arbitrage trade is easier to implement when the stock index futures contract price is above its theoretical level than when it is below that value. What institutional realities might make this statement true? Des..
The old machinery was purchased for $1 million 3 yrs ago, and is being depreciated on a straight-line basis over its 5 year life. Its economic life as of today, however, is estimated to be 5 years. It can be sold for $300,000 today.
How much new equity capital will the company need to raise to finance the extra dividend payment?
At year-end 2015, Wallace Landscaping’s total assets were $1.2 million and its accounts payable were $410,000. Sales, which in 2015 were $2.2 million, are expected to increase by 25% in 2016. Total assets and accounts payable are proportional to sale..
What is impact of changes in flow of dividends on valuation of common stock? How should you approach valuation of common stock that does not pay dividends?
Ticho Gas and Electric is required to carry a minimum of 20 days’ average coal usage, which is 100 tons of coal. It takes10 days between order and delivery. At what level of coal would TG&E reorder?
Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually.
Suppose you sell four-month forward contract at $42. What is the value of your forward contract?
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