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Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond pays 4 percent annual interest and has 18 years remaining to maturity. The current yield to maturity on similar bonds is 12 percent.
a. What is the current price of the bonds? Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
b. By what percent will the price of the bonds increase between now and maturity?
East coast television is considering a project with initial outlay of $X ( you will have to determine this amount) It is expected that the project will produce a positive cash flow of 43,000 a year at the end of each year for the next 17 years. The a..
Consider a firm that had been priced using an 11.5 percent growth rate and a 13.5 percent required return. How much should the stock price change.
What is the profit or loss on the call just prior to expiration if the stock price is $108?
Waterford Industries is considering the purchase of a new machine. It will replace an existing but obsolete machine that will be sold for $50,000. What is the after-tax salvage value of the old machine?
Zerox Corporation, a manufacturer of office equipment, is headquartered in Connecticut. Zerox stock (ZRX) is traded on all major exchanges. The price of common stock has languished in the $7-9 range, for the past several years. Annual sales are $18 b..
You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.28 and the total portfolio is equally as risky as the market. Required: What must the beta be for the other stock in your portfolio?
You have just turned 22 years old. Now you must decide how much money to put into your retirement plan. The plan works as follows: Every dollar in the plan earns 6.6% per year. You cannot make withdrawals until you retire on your 65th birthday. You w..
A portfolio had an original value of $7,400 seven years ago. The current value of the portfolio is $11,898. What is the average geometric return on this portfolio?
What are the major stakeholder management and ethics challenges companies face as they grow from local to global? Which stakeholder management model provides the best opportunity to address these challenges?
A corporate bond with a 5.75 percent coupon has 15 years left to maturity. It has had a credit rating of BB and a yield to maturity of 6.25 percent. The firm has recently gotten more financially stable and the rating agency is upgrading the bonds to ..
You are evaluating two different cookie-baking ovens. If your discount rate is 12 percent, what is each machine’s EAC?
This is due to the insurance company's administrative costs and profits. In spite of this fact, why do so many individuals and organizations purchase insurance policies?
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