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Explain or define each of the following:
A. Discount rate, how is it set?
B. Explain the relationaship between the discount rate, and the Fed. Fund Rate.
C. A U.S. Treasury bill with a 180 days to maturity has a discount yield of 5% and a face value of $100,000. What is its current price?
D. WHat does an inverted Treasury yield curve about future expectation about the economy?
E. Explain herding behavior by investors.
F. How would a potential bias effect the way you invest in securities?
Find the WACC for a firm with the following characteristics. A few years ago the firm issued $4,000,000 debt with a coupon rate of 4%; currently that debt is trading with a yield to maturity of 5.5% and a value of $3,500,000. The firm plans on keepin..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next few years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a $3 per share dividend in year 6 and wi..
Overall trend assessment of the company’s balance sheet, income statement, and statement of cash flows for the last three years. Selected ratio and trend analysis. Ratios must include liquidity, asset management, solvency, profitability, and market v..
Yan Yan Corp. has a $3,000 par value bond outstanding with a coupon rate of 5 percent paid semiannually and 12 years to maturity. The yield to maturity on this bond is 5.6 percent. What is the price of the bond? (Do not round intermediate calculation..
A host of empirical evidence indicates that the gains from a typical merger accrue to the shareholders of the target corporation, not to the shareholders of the acquiring corporation. It seems the acquiring corporation should be in the "driver’s seat..
Describe the factors you should consider when assessing the choices related to declaring personal bankruptcy.
The common stock of Denis and Denis Research Inc. Trades for $60 per share. Investors expect the company to pay a $3.90 dividend next year, and they expect that dividend to grow at a constant rate forver. If investors require a 10% return on this sto..
What is the impact of hedging on a firm’s overall cost of capital? Will it affect both the cost of debt as the cost of equity? Explain.
Laverne Industries stock has a beta of 1.44. The company just paid a dividend of $.94, and the dividends are expected to grow at 5.4 percent. The expected return of the market is 11.9 percent, and Treasury bills are yielding 5.4 percent. The most rec..
You are given the following information for Watson Power Co. Assume the company’s tax rate is 35 percent. Debt: 6,000 6.7 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 103 percent of par; the bonds make semiann..
Appliance for Less is a local appliance store. It costs this store $22.92 per unit annually for storage, insurance, etc., to hold microwave in their inventory. It takes approximately 5 day(s) to receive an order after it has been placed. If the store..
Explain the financial Axioms-Risk-return trade-off and Time value of money
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