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A 12 year bond has 6 years left to maturity and its coupon rate is 8%, paid semi-annually. Consider each of the following situations separately. Please show work.
A. If the required return on this bond (the current market rate for similar bonds) is 6%, will this bond sell for a premium or a discount (no calculations are needed)?
B. What is the bond’s current price if the market rate is 4.5%?
C. Using the answer in part b, determine the Current Yield.
D. If the bond is currently quoted at 92.95 in the market, what is the Yield to Maturity?
Arthur’s toys paid a dividend of $3.00 recently. Company projections made by Arthur estimate the dividend will remain at that level for years 1 and 2. Following this, the dividend is supposed to grow at a 10% rate for years 3 and 4. Finally, the divi..
Find the value today in USD of a 1-period at-the-money call option on YEN 300,000. The spot exchange rate is YEN 100 / USD. In the next period, the YEN can increase by 15 percent or decrease by 15percent. The risk free rate in USD is 5 percent. Th..
Japan has a higher ratio of stock market capitalization relative to GDP than the US. What would explain this? What lessons can economists draw from the breakdown of the Bretton Woods system? The Fed adopts an easier monetary policy. How is this likel..
Kurt Simmons has 80/150/15 auto insurance coverage. One evening he lost control of his vehicle, hitting a parked car and damaging a storefront along the street. What amount will the insurance company pay for the damages? What amount will Kurt have to..
Electronic Products has 35,000 bonds outstanding that are currently quoted at 102.3. The bonds mature in 11 years and carry a 9 percent annual coupon. What is the firm's aftertax cost of debt if the applicable tax rate is 30 percent?
A company currently has a 51 day cash cycle. Assume the firm changes its operations such that it decreases its receivables period by 3 days, increases its inventory period by 4 days, and increases its payables period by 1 day. What will be the length..
Why is it important for leaders to evaluate financial performance? What actions can you take in your own role to evaluate the financial performance of your department? How can this information be used to your advantage as well as your firms?
What is the yield to maturity on a Treasury STRIPS with 7 years to maturity and a quoted price of 77.859?
Explain how the tax code allows depreciation to contribute to cash flow. Explain why inflation may restrict the usefulness of the balance sheet as normally presented.
Go to the following online brokerages and compare their transaction fees: AMERITRADE, E-TRADE, and ScottTrade.- Which has the highest transaction fee?
Bloomfield Tires has assigned a discount rate of 14.4 percent to a new project that has an initial cost of $229,000 and cash flows of $74,300, $128,700, and $89,500 for Years 1 to 3, respectively. What is the net present value of this project?
On January 2013, Professor Lee buys a house. Here is the information. What is the effective interest rate? If from January 2013, Professor Lee plans to sell his house after 15 years. What is the effective interest rate for Professor Lee in Jan 2013?
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