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If you buy a bond that is selling at a discount to its maturity value, what will happen to the price (value) of the bond as the maturity date nears if market interest rates do not change during the life of the bond?
a. Because interest rates remain constant, nothing happens to the market value of the bond.
b. The price of the bond should decrease even further below the bond's face value because the rates in the market are too high.
c. The required rate of return for the bond must be less than the bond's coupon interest rate.
d. The price of the bond will increase as the bond gets closer to its maturity because the bond's value has to equal its face value at maturity.
e. None of the above is a correct answer.
Maggie’s Muffins, Inc., generated $5,000,000 in sales during 2013, and its year-end total assets were $2,500,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..
With reference to case study session 1, obtain the Dow Jones Islamic Index over a recent 15 year period. Then answer the following questions. End of Dow Jones Islamic Year Index 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 20..
Kurnick Co. expects that the pound will depreciate from $1.70 to $1.68 in one year. It has no money to invest, but it could borrow money to invest. It has been approved by a bank to borrow either 1 million dollars or 1 million pounds for one year. De..
Outdoor Sports is considering adding a miniature golf course to its facility. The course would cost $138,000, would be depreciated on a straight-line basis over its five-year life, and would have a zero salvage value. The project will require $3,000 ..
why do you think maximizing liquidity is more important than minimizing basis risk?
Purpose: This exercise is designed to give you experience preparing projected financial statements. Pro forma analysis is a central strategy-implementation.
A company's debt is given by a bond that will mature in two years. After two years the company will terminate all activity. The company unlevered equity value in two years can be $17 millions with a 50% probability or $14 millions with probability 50..
Two firms each have reported EPS of $5 per share. Firm A has reported that 80% of their earnings are “permanent” earnings, while 20% are one-time “transitory” earnings. Firm B has reported that 60% of their earnings are “permanent” earnings, while 20..
A business borrows $296,926 for 9 years at an annual rate of interest of 6%. If payments are annual and the loan will negatively amortize by $49,469, what will be the annual payment required? What is the present value of a perpetuity making quarterly..
What was the cash advance fee? What was the total amount she paid? What was the interest for one month at an APR of 18 percent?
Corporate Ethics. Is it unfair or unethical for corporations to create classes of stock with unequal voting righStock Valuation. Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an o..
You take out a $200,000 mortgage for 20 years at 6%. What is your monthly payment? What is the principle and interest on the first payment? What is the principle and interest on the twelfth payment? How much interest will you pay over the 20 years?
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