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We have the X bond which has a duration of 4, a ytm of 12% and a maturity of 25 years. The central bank is injecting huge liquidity, and there is no fear of inflation. If the yields alter by 100 basis points, what would the price change be? If the yields were to alter by 200 basis points, what would be the new change of the X bond?
Suppose the interest rate on a 1-year bond is 4% and that on a 2 year T-bond is 4.5%. Assuming the pure expectation theory is correct, what is the market's forecast for 1-year forward rate one year from now?
How is the internal rate of return of a project calculated, and what must be considered when using the internal rate of return rule? How should the cash flows of a proposed new project be calculated?
After six months go by, you receive the first interest payment of $300. The annual market interset rate has declined to 5 percent and you decide to sell the bond. What is the bond's present value when you sell it? show your work.
What are cost-savings ideas, revenue growth opportunities, and strategies for productivity improvements for Forever 21 Company?
The Bumble Bee. Corp. has a beta of 1.45. You observed the risk free rate of return to be 6.5% and the market risk premium of 5%. What is the expected return of the stock?
Calculate each stock’s coefficient of variation. Which stock is riskier for a diversified investor? Calculate each stock’s required rate of return. Calculate the required return of a portfolio that has $7,500 invested in Stock X and $2,500 invested i..
Contracting Inc. is bidding upon a service contract for Harvard to maintain and upgrade three classrooms per year for the next nine years. The contract will require purchasing $1,872,000 in equipment that will be depreciated using straight-line depre..
What impact does asymmetric have on the optimal level of leverage? In your answer be sure to describe the implications of adverse selection and the lemons principle for equity issuance, as well as the empirical implications.
Which of the following are relevant cash flows? You pay a lawyer $34,000 to examine the copyright issues of a new project prior to its implementation. A cell-phone company losses $10,000 of sales of an old phone model due to a new model hitting the m..
Choose of the following statements about opportunity costs is false? The opportunity cost rate to be applied to any investment is the rate of return that could be earned on alternative investments of similar risk.
Big steve's makers of swizzle tickets is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 nd will generate net cash inflows of $16,000 per year for 8 years. What is the projected NPV u..
Home Depot, Inc. (HD) had 1.70 billion shares of common stock outstanding in 2008, wheras Lowes Companies, Inc. (LOW) had 1.46 billion shares outstanding. Assuming Home Depot's 2008 interest expense is $696 million, Lowes' interest expense is $239 mi..
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