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Henry Bucker, CFA, is researching about some bonds he plans to suggest to his client as part of his portfolio. He has narrowed down his options to six bonds, namely A, B, C, D, E, and F. Both A and D are zero-coupon bonds. On the other hand, both B and E offer a 4% coupon rate, while C and F offer a 9% coupon rate. The time to maturity of bonds A, B, and C is three years, whereas bonds D, E, and F is six years. The yield-to-maturity for all bonds is 5%. Which among these bonds will have its price go down the least on a percentage basis if the yield of all the bonds increases by 15 basis points?
What are the linkages among financial decisions, return, risk and stock value? Why are these linkages important? How does the financial manager incorporate these as s/he manages the assets and liabilities of the firm? Be sure to include examples to p..
At year-end 1998, Acme Inc. had total assets of $300 million, and sales for 1998 were $900 million. The company has a 33.33% debt to total assets ratio. Sales for 1999 are expected to increase by 25%. Assuming constant asset turnover and leverage, an..
A stock is expected to pay a dividend of $1.000 next year. Dividends are expected to grow at the rate of 3% per year after that. Earnings next year are expected at $1.50. The risk-free rate of return is 2% and the market risk premium is 5%. What is t..
The markets in general are paying a 3% real rate of return. Inflation is expected to be 2%. ABC stock commands a 6% risk premium. What is the risk-free rate of return? An investment produced annual rates of return of 5%, 12%, 8% and 11% respectively ..
Tresnan Brothers is expected to pay a $3.3 per share dividend at the end of the year (i.e., D1 = $3.3). The dividend is expected to grow at a constant rate of 4% a year. The required rate of return on the stock, rs, is 9%. What is the stock's current..
XYZ has 400,000 shares of common stock outstanding, a P/E ratio of 8, and $500,000 in net income. The board of directors has just voted in favor of the 3-for-2 stock split. You owned 100 shares before the stock split. How many shares will you own aft..
The great, great grandparents of one of your classmates sold their factory to the government 104 years ago for $150,000. If these proceeds had been invested at 6%, how much would this legacy be worth today? Assume annual compounding.
how much of this judgment would the insurance cover?
Buying Stock with a Market Order You would like to buy shares of International Business Machines (IBM).
Firm A and Firm B need to raise $100,000,000 of debt to pay for their projected capital expenditures. Firm A is a blue chip company with a high credit rating in the corporate debt market. It can borrow funds at either 10.75% fixed rate or at LIBOR + ..
AMF Corporation is considering the purchase of a warehousing facility. AMF plans to finance this by borrowing the entire purchase price of the warehouse at a 10% annual interest rate for 20 years. If the purchase price of the warehouse is $200,000, w..
FIN202 - Financial Institutions - "CAUSES AND EFFECTS OF THE GLOBAL FINANCIAL CRISIS OF 2007-09, WITH SPECIAL REFERENCE TO THE IMPACTS ON FINANCIAL MARKETS, INSTITUTIONS AND INSTRUMENTS"
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