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You will invest (not investing is not a choice) in one of two bonds that are identical except for the details of their sinking funds. The sinking fund for Bond A calls for periodic redemption of bonds, with the bonds to be redeemed chosen by a random lottery. The sinking fund for Bond B requires that the company deposit with a very sound financial institution, which will act as the Trustee, funds that will be invested in US Treasuries that will mature at the same time as does Bond B. The total of the company's payments to the sinking fund and the interest earned on the Treasuries will be sufficient to redeem all of the bonds in the Bond B issue at maturity.
(A) From your perspective as an investor, what are the pros and cons of each approach if both bonds are rated BBB by S&P and Fitch and Baa2 by Moody's? Be sure to explain the reasons you classified things as pros and cons.
(B) Is one approach "fairer" to all the investors in aggregate? Discuss your reasons and logic that led you to your conclusions.
A portfolio manager has a $10 million portfolio, which consists of $1 million invested in ten separate stocks. The portfolio beta is 1.2. The risk-free rate is 5 percent and the market risk premium is 6 percent.
Have you ever been in a corporation that was merged with another firm? What were the reasons given for the need to merge? Were the targets met?
Which of the following statements concerning summary material modification is correct?
If the inflation rate last year was 4 percent, what was your total real rate of return on this investment?
What would be the value of this bond if interest rates fall to 5% seven days after it is purchased? If interest rates fell to 5% after two year, what would the bond be worth at that point?
Firm x has a target capital structure of 40% debt and 60 percent common equity, with no preferred stock. The yield to maturity on the firm's outstanding bonds is 9.96%.
A firm evaluates all of its projects by applying the IRR rule. If the required return is 18%, should the firm accept the following project?
which financial statement(s) and financial ratios would you be most concerned with? Which would provide the most relevant information about a firm's ability to repay its loan?
Beginning net net fixed assets of $218,470 and ending net fixed assets of 209,411. During the year, assets with a combined book value of $6,943 were sold. Depriciation for the year was $42,822. What is the amount of the net capital spending?
The fund will disburse monthly for 12 years, and the desired cash balance at the end of 12 years is $1,000,000. What is the monthly payment that can be made from this fund?
computation of value of the stock using constant growth model where The current risk-free rate of return is 5% and the market risk premium is 8%
The newspaper reported last week that Bennington Enterprises earned $28 million this year. The report also stated that the firm's return on equity is 15 percent. Bennington retains 70 percent of its earnings.
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