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1. A ten year 100 par bond pays 8% coupons semi-annually. The bond is priced at 118.20 to yield an annual nominal rate of 6% convertible semi-annually. Calculate the redemption value of the bond. Show all work
2. Find the prices of a 10% coupon bond with a face value of $1000 on the following yield to maturities: 0.1225, 0.1175, 0.10, 0.0484, and 0.0713, and 12 years to maturity. Calculate the interest rate at each price. Based on your results what is the relationship between the interest rate and the price of the bond? What is the relationship between yield to maturity and interest rate?
Martin Corporation is financed with 40% debt and 60% common equity. The after tax cost of debt is 10% and the cost of common equity is 14%. What is Martin’s weighted average cost of capital? Instead, assume that the restructuring is completed and Mar..
Optimal policy mix Assume that Atlas Sporting Goods, Inc., has $800,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 15 percent, but with a high-liquidity plan the return will be 12 percent. If the firm goes..
Nemo has a prize bull named Cyclops. If Hector does have a security interest, is it a perfected security interest?
Mega stock is expected to grow at 11% in year 1 and year 2, 10% in year 3, 8 % in year 4 and then grow at a constant rate of 4% in the years that follow. The required rate of return (Rs) equals 7%. The company will pay a Dividend at the end of year 1..
In the previous problem, suppose you sell the stock at a price of $62. What is your return? What would your return have been had you purchased the stock without margin? What if the stock price is $46 when you sell the stock? You purchase 275 shares o..
You are evaluating a project that costs $840,000, has seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,000 units per year. Price per unit is $40, vari..
Crandal Dockworks is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Crandal's flotation expense on the new bonds will be $50 per b..
You want to buy a house but do not want to get a loan. The average price of your dream house is $500,000 and its price is growing at 5 percent per year. How much should you invest in a project at the end of each year for the next 5 years in order to ..
A firm has $16,718 in outstanding checks that have not cleared the bank. The firm also has $13,450 in deposits that have been recorded by the firm but not by the bank. The current available balance is $11,407. What is the status of the net float?
Jurden WIndows Inc. hired JUstin, a new sales VP, two years ago. Justin is 51. In the words of the company CEO, Justin has "taken the company to the moon." The CEO would like to adopt a special retirement plan just for Justin. Ideally, it would be a..
A company currently pays a dividend of $1.5 per share (D0 = $1.5). It is estimated that the company's dividend will grow at a rate of 22% per year for the next 2 years, then at a constant rate of 7% thereafter. What is your estimate of the stock's cu..
What was the net income? Assume that all dividends declared were actually paid.
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