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1. Call Feature. What is a call feature on a bond? How will a call feature affect investor interest in purchasing the bond?
2. Convertible Bond. What is a convertible bond? How does a bond's convertibility feature affect its return?
Essary Enterprises has bonds on the market making annual payments, with eight years to maturity, a par value of $1,000, and selling for $952. At this price, the bonds yield 6.1 percent. What must the coupon rate be on the bonds?
Using the Black-Scholes model, explain what happens to the value of a call as S, T, and s2 change. Why is the relationship between risk and price different for options than for other securities?
The Ogi Corporation, a construction company, purchased a used pickup truck for $22,000 and used MACRS depreciation in the income tax return. During the time the company had the truck, they estimated that it saved $8,000 a year. At the end of 4 years,..
Constant Growth Valuation Crisp Cookware's common stock is expected to pay a dividend of $2 a share at the end of this year (D1 = $2.00); its beta is 1.05; the risk-free rate is 2.7%; and the market risk premium is 4%. what does the market believe wi..
The most recent financial statements for Live Co. are shown here: Income Statement Balance Sheet Sales $11,000 Current assets $23,719 Debt $23,377 Costs 6,600 Fixed assets 16,598 Equity 16,940 Taxable income $4,400 Total $40,317 Total $40,317 Taxes (..
Using a 4.4% discount rate, calculate the Net Present Value, Payback, Profitability Index and IRR for each of the investment projects below. Assuming a budget of $1,200,000 what are your recommendations for the three projects in the above problem? Ex..
You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $130 initially, and then $175 per year in maintenance costs. Either machine must be replaced at the end of its life wit..
Prepare a schedule the intangible section of Lewiss balance sheet at December 31, 2011. Show supporting computations in good form.
Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semi annual interest payments. Bond A has a coupon rate..
Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with five years to maturity (YTM) has a coupon rate of 3%. the yield to maturity of the bond is 9.90%. Using this information and ignoring the other costs involved, calculate th..
Your firm is contemplating the purchase of a new $630,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $70,000 at the end of that time. You will be able to reduce wo..
According to the expectations theory of the term structure of interest rates,
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