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A company's 5-year bonds are yielding 9.9% per year. Treasury bonds with the same maturity are yielding 5.5% per year, and the real risk-free rate (r*) is 2.35%. The average inflation premium is 2.75%, and the maturity risk premium is estimated to be 0.1 x (t - 1)%, where t = number of years to maturity. If the liquidity premium is 1.4%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
Two years ago, you bought a fifteen-year bond at its face value of $1,000. What is the value of the bond today?
Bill Blank signed an $8,150 note at Citizen’s Bank. Citizen’s charges a 6.4 % discount rate. Assume the loan is for 310 days. Find the proceeds. Find the effective rate charged by the bank.
Old Alfred Road, who is well-known to drivers on the MaineTurnpike, Can Mr. Road safely spend all the interest for his investment portfolio?
Explain why bondholders often prefer a sinking fund provision in a bond issue. Explain what is meant by interest rate risk.
Most government lotteries pay out jackpots in the form of a twenty- or thirty-year annuity, but they also give winners the option to collect their winnings as a much smaller lump sum. Explain how you would use time value of money analysis to choose b..
Kollo Enterprises has a beta of 0.70, the real risk-free rate is 2.00%, What is Kollo's required rate of return?
What is the standard deviation on this investment?
Explain what an MNE needs to consider when borrowing funds in a foreign currency.
Given the following information, calculate the weighted average cost for the Han Corp. Percent of capital structure: Preferred stock 10% Common equity 70% Debt 20% Additional information: Corporate tax rate 34% Dividend, preferred $8.00 Dividend, exp..
The December 31, 2007, balance sheet of Anna’s Tennis Shop, Inc., showed current assets of $840 and current liabilities of $320. The December 31, 2008, balance sheet showed current assets of $910 and current liabilities of $335. What was the company’..
Express the change in internal energy in kilojoules per mole to three significant figures.
Choosing One Portfolio. The following table shows your predictions of the future returns on three mutual funds. Treasury Bills currently earn 4%. To invest all your wealth, you are limited to choosing a portfolio of only one of these three funds alon..
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