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An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 10% annual coupon. Bond L matures in 15 years, while Bond S matures in 1 year.
a. What will the value of each bond be if the going interest rate is 5%, 8%, and 12%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 15 more payments are to be made on Bond L.
b. Why does the longer-term bond’s price vary more than the price of the shorter-term bond when interest rates change?
Six years ago the Singleton Company issued 20-year bonds with a 14% annual coupon rate at their $1,000 par value. The bond had a 9% call premium, with 5 years of call protection. Today Singleton called the bonds. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. Explain why the investor should or should not be happy that Singleton called them.
Unfortunately, the company has fallen on hard times. The 5 million shares are trading for only $4 apiece and the market value of its debt securities is 20% below face (book) value. Because of the comapny's large cumulative, it will pay no taxes on fu..
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Which one of the following statements is correct about a good-'til-cancelled order? The order generally expires after six weeks. The order will automatically renew unless cancelled by the customer.
Find the IRR and NPV for given question - NPV and IRR calculations
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Burnham & Company's $75.00 par-value preferred stock pays an annual dividend of $11.00. The stock has a beta of 0.85, the current T-bill rate is 2.40%, and the S&P 500's expected return (RM) is 11.30%. Assuming that CAPM holds, what is the intrinsic ..
The recapture of net working capital at the end of a project will __________
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Consider the role of the IMF in the recent financial crisis which began in 2008.Write a one to page essay detailing the role of the IMF in alleviating the financial crisis and in the ongoing recovery.
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Three years ago, Joe bought a 5-year, 10% coupon paid semi annually bond for $1000. Currently, with interest rates having risen sharply, the bond is selling for $800 and you decide to sell it off. If you had re-invested the semi-annual coupons as you..
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns.
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