User Account

All Pages

Price of a bond with the risk-free cash flows

Assignment Help Finance Basics
Reference no: EM133113684

Assume that transaction costs are zero and there is no credit risk in any transaction. Suppose that: (1) the price at time 0 of a 2-year annual-pay coupon bond with face value $100 and a coupon rate of 5% is $90, and (2) the price at time 0 of a 1-year zero coupon bond with face value $100 is $86. What must be the time 0 price of a bond with the following risk-free cash flows?

Cash flows:

Year 1 $70 , Year 2 $210

Reference no: EM133113684

Questions Cloud

Dollar value of tom interest tax shield : Tom has $100 of outstanding debt, on which it pays an interest rate = 15%/year. Its corporate income tax rate = 20%. Its full income statement is as follows:
Calculate the weights of the optimal risky portfolio : Use the risk-free rate and THREE of the risky assets of your choice to calculate the weights of the optimal risky portfolio, by maximizing the Sharpe Ratio (slo
Dollar amount of performance fee : High Rollers Hedge Fund has a standard 16 percent performance fee. If High Rollers were able to raise $23 million and generate a 21 percent return in its ?rst y
What are the rights of trainees : What are the rights of trainees? What are the main responsibilities of supervisors? What kind of specialized training have you had in supervision?
Price of a bond with the risk-free cash flows : Assume that transaction costs are zero and there is no credit risk in any transaction. Suppose that: (1) the price at time 0 of a 2-year annual-pay coupon bond
Fixed-rate mortgage with no-point : 4) For this fixed-rate mortgage with no-point (mortgage A), what is the effective yield?
Study of organizational behavior : The concepts of power, trust, influence, and politics are critical to the study of organizational behavior.
Debt financing and equity financing : Explain the three trade-offs that guide the choice between debt financing and equity financing.
European option and an american option : b. What are the key inputs that determine an option's price? Please explain each input and its key function.

Reviews

Write a Review

Finance Basics Questions & Answers

  What are stock splits and stock dividends

Question - What are stock splits and stock dividends? What are the advantages and disadvantages of each

  Approximate rate of return

Nathan buys several shares of ABC Corp. stock for $60 each. At the end of one year, the stock price has risen to $66. Plus he was paid a dividend of $3 per share. What is the approximate rate of return (or yield) on this investment for the year. (..

  Demand forecasting-types-methods and examples

As the regional manager of 20 restaurants, you are considering to expand the number of outlets in the local area. What types of forecasts would you want to crea

  What is the npv of the investment

If you insulate your office for $23,000, you will save $2,300 a year in heating expenses. These savings will last forever.

  By using the raos information determine the total amount of

raj and kavitha rao are a married couple in their early 20s living in denver. raj earned 53000 in 2011 from his job as

  Research to develop a new computer game

KADS, Inc., has spent $320,000 on research to develop a new computer game. The firm is planning to spend $120,000 on a machine to produce the new game.

  What is the current pe ratio for each company

Assume that all earnings are paid as dividends and that both firms require a 13 percent rate of return.

  What is the brady cost of equity

Brady Co. has no debt but can borrow at 7 percent. The firm's WACC is currently 10 percent, and the tax rate is 30 percent.

  Why did so many people expect the students to fail

A) Why did so many people expect the students to fail? The movie, address the following prompts:

  What is the value of the option to abandon the project

Additionally, if it abandons the project, the company will have no cash flows in years 3 and 4 of the project.

  Achieve a zero pay-out policy

How can a shareholder, who owns 1000 shares, achieve a zero pay-out policy on their own?

  What is Phil return on the NCD

The NCD matures today at a price of $1 million, and Phil received $45,000 in interest. What is Phil's return on the NCD

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd