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1. Large institutional investors can have considerable influence over an organization's corporate finance decisions. True False
2. Preferred stock is considered a hybrid because the value can increase, like common stock, but it also offers interest payments, like a bond. True False
3. When an organization is unable to fulfill the obligations of its debt covenants under a bond indenture, the legal consequence could result in the organization’s assets being transferred to the bondholders. where the assets of the firm are transferred to the debt-holders. True False
4. In an effort to optimize the capital structure, an organization may continue to add debt to the capital structure, up to some point where the tax benefits of the debt are overcome by the burden of interest payments. True False
Estimating cost of mutual fund investments.
A sporting goods manufacturer has decided to expand into a related business. Management estimates that to build and staff a facility of the desired size and to attain capacity operations would cost 450 million in present value terms. Referring to the..
If market risk (beta) increases by 50%, and all other factors remain constant, what will be the new stock price?
What is an inflation risk premium? What effect does the inflation risk premium have on the yield curve?
A firm’s capital consists of: - $10m in common with a 14% yield - $6m in preferred with a 7.5% coupon and a 9% yield - $4m in bonds with a 6% coupon and a 4.3% yield-to-maturity. Its average tax rate is 24% and its marginal tax rate is 32%. What is t..
Mathematics of Finance - A family has just purchased a new home for $165,000. After they put down a 20% down payment, they borrow the rest at 5.35% for 15 years. How much is the monthly mortgage payment? How much interest will they pay over the entir..
Find the effective rate of return on 15% debentures of face value Rs.100/- issued at a premium 2% interest being paid quarterly.
A Treasury bill that settles on May 18, 2012, pays $100,000 on August 21, 2012. Assuming a discount rate of 3.87 percent, what is the price and bond equivalent yield? Use Excel to answer this question.
Distinguish between conditional portfolio and unconditional models of portfolio performance.
One year from today you must make a payment of $5,000. To prepare for this payment, you plan to make 2 equal quarterly deposits, at the end of Quarters 1 and 2, in a bank that pays 6% nominal interest, compounded quarterly. How large must each of the..
Stocks A and B haver the following data. Assuming the stock market is efficient and the stocks are in equilibrium,
On your 30th birthday, you decide to open an individual retirement account (IRA) and deposit $500. You continue to make monthly deposit of $500 each until your 45th birthday (your last deposit of $500 will be made on your 45th birthday). How much tot..
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