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As a newly hired CEO of the People Trust Co., the first you do is to study the firmAc€?cs balance sheet. You find that your firm has $100 million in three-year loans (total assets), $70 million in one-year deposits (total liabilities) and $30 million in equity. You feel that the interest rate risk of equity holders is too high and decide to issue a $20 million long-term subordinated bond and repurchase $20 million equity. Which choice of bonds would eliminate interest-rate risk of equity holders?
A) A bond with a duration of 1
B) A bond with a duration of 3
C) A bond with a duration of 7.67
D) A bond with a duration of 11.5
The probability of this tactic succeeding is (1/2), in which case he will get a payoff of 3, and the probability of it failing is (1/2), in which case he gets a payoff of -4. If he doesnt bring up the issue he neither gains nor loses and so his pa..
How would your answer to Part a change, if at all, if the FMV of the gift property was $85,000 as of the date of the gift?
Objective type questions on Cost of Capital & Stock and Under the MM extension with growth, what is its cost of equity
McKinnley Company is constructing a plan to finance its asset base. The firm has $5,000,000 in current assets, of which 20 percent are permanent, and $12,000,000 in fixed assets.
Financial control is used in conjunction with the firm's budgetary process to ensure the organization is meeting its commitments and goals. Why is it important for the CFO to maintain financial control?
a coupon bond pays semi-annual interest is reported as having an ask price of 97 of its 1000 par value in the wall
A stock is at present valued at $24 a share, standard deviation of its return is 60 percent a year, and the risk free rate is 4% per year. The company pays $0.30 quarterly dividend per share.
directions answer the following five questions on a separate document. explain how you reached the answer or show your
If Amazon hits the sales and profit margin targets given, what will its net profit be in 2013? Do not round this answer.
My company showed retained earnings of $400,000 on its balance sheet past year. This year, the company's earnings per share were $3 and its dividends paid each share were $1.00.
mt 217 electronics is a midsized electronics manufacturer located in melbourne florida. the company president is sherry
Suppose that she can obtain a 9% average return on her deposits and on her funds accumulated on her retirement plan.
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