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Suppose that the risk-free zero curve is flat at 6% per annum with continuous compounding and that defaults can occur at times 0.25 years, 0.75 years, 1.25 years, and 1.75 years in a 2-year plain vanilla credit default swap with semiannual payments.
Suppose that the recovery rate is 20% and the unconditional probabilities of default (as seen at time zero) are 1% at times 0.25 years and 0.75 years, and 1.5% at times 1.25 years and 1.75 years.
What is the credit default swap spread? What would the credit default spread be if the instrument were a binary credit default swap?
In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the "terminal" stock price using a benchmark PE ratio.
A couple wants to renovate their house in 3 years. They need $27,000 which they plan to save for in monthly payments in an account that pays 8.5% compounded monthly. How much would their monthly savings be
To fund the purchase, the private equity firm assumes all existing $100 debt at the current 4% interest rate, borrows $100 in new debt with a 12% interest rate, and contributes $20 in equity.
Assume that today is December 31, 2012, and that the following information applies to Vermeil Airlines: After-tax operating income [EBIT(1 - T)] for 2013 is expected to be $700 million. The depreciation expense for 2013 is expected to be $90 million.
the following data relate ti inventory for the year ended December 31, 2011. A physical inventory on December 31,2011, indicates that 600 units are on hand that they came from the July 1 purchase.
Suppose a German company issues a bond with a par value of 1000, 15 years to maturity, and a coupon rate of 7.7 percent paid annually. If the yield to maturity is 8.8 percent, what is the current price of the bond
What would be the market value of Trident Corporation if it were unlevered and what would be the expected return on equity if Trident were an all-equity firm
A firm has been losing sales due to technological obsolescence. It projects growth for the future to be -2%. Its recent divided was $2.00. What is the value of this stock when the required return is 9%
Todd is able to pay $360 a month for 6 years for a car. If the interest rate is 6.7 percent, how much can Todd afford to borrow to buy a car
The breakeven sales level for Cohen's has been estimated to $500,000. Fixed costs total $250,000. What effect will a 15 percent increase in sales have on EBIT?
An experiment consists of rolling a die and flipping a coin. If the coin flip is heads, the value of the die is multiplied by -1, otherwise it is left as is. - What are the possible outcomes of this experiment?
Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.10 million.
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