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1. A firm has an issue of $1,000 par value bonds with a 9 percent coupon. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of the same risk are currently earning 8 percent, what is the price of the bond?
1) $1,135.26
2) $915.29
3) $1,067.10
4) $951.53
2. Compute the internal rate of return for the cash flows of the following two projects (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.): Year Project A Project B 0 –$ 7,300 –$ 4,900 1 2,800 1,600 2 3,600 3,300 3 2,400 2,000 Internal rate of return Project A % Project B %
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Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). Calculate the project’s Time 0 cash flow, taking into account a..
You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand.
A stock has yielded returns of 6 percent, 11 percent, 14 percent, and -2 percent over the past 4 years, respectively. What is the standard deviation of these returns?
Eakins Inc.’s common stock currently sells for $55.00 per share, the company expects to earn $2.75 per share during the current year, its expected payout ratio is 70%, and its expected constant growth rate is 6.00%. New stock can be sold to the publi..
Suppose that you are comparing put and call prices on the same underlying stock and the strike prices and time-to-expiration of the two options match.
How much lower will your total return be because of your trades?
X and Y have original investments of $54,835 and $109,033 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $..
Use the formula for continuous compounding A = Pert, where A is the account balance after t years for the principal P and annual interest rate r (in decimal form). A deposit of $7000 is placed in a savings account for 2 years. The interest is compoun..
An irrigation system is being considered with a first cost of $200,000 with (current) annual maintenance costs of $2,000. The irrigation system is expected to bring $22,000 per year in additional (current) revenues. Using the current cash flows, find..
Illusory superiority bias explains: Why more than half of drivers believe they are better than average. Why people love the color blue more often than the color yellow. Behavioral finance deals with: When you assign a lower than correct probability t..
Cook Farm Supply Company manufactures and sells a pesticide called Snare. Prepare the budgeted multiple-step income statement for the first 6 months.
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