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You are a new analyst at Marshall Capital, and you are looking to purchase General Motors bonds for an investment. The bonds are currently selling for $1253 and have a yield to maturity of 8%. The bond will mature in 10 years and makes semiannual coupon payments.
a) What is the coupon rate of these bonds?
b) What is the current yield on this bond?
c) In a year, suppose that investors gain confidence in the market and believe that it has come less risky. This results in a shift in the market rate from 8% to 6%. What would you be willing to pay for the same bond? Is the bond selling at a discount of premium?
Using the example of a savings account, explain the difference between the effective annual rate and the annual percentage rate.
Your finance text book sold 47,500 copies in its first year. The publishing company expects the sales to grow at a rate of 20.0 percent for the next three years, and by 14.0 percent in the fourth year. Calculate the total number of copies that the pu..
Farrowtech currently does not pay a dividend and they have announced to the market that they will not pay a dividend for the next ten years. However, analysts expect that they will pay their first dividend of $3.66 in eleven years and they feel that ..
Suppose an office building has a single tenant who pays $50,000 per year at the end of each year in a 5-year triple-net lease (annual payments). At the end of 10 years, just after collecting the rent for that year, you expect to sell the building for..
Weston Industries has a debt-equity ratio of 1.8. Its WACC is 11 percent, and its cost of debt is 10 percent. The corporate tax rate is 33 percent. The cost of equity would be percent if the debt-equity ratio were 2, percent if the debt-equity ratio ..
What is the duration of a two-year bond that pays an annual coupon of 12 percent and has a current yield to maturity of 14 percent? Use $1,000 as the face value.
L web is bidding to provide web services for a company. The company pays its current provider $10,000 per year for hosting its web page, handling transactions, etc. If L web's cost of capital is 9.9%, can it bid less than $10,000 per year to provide..
Defensive open market operations are used to _____. Because timely information on the price level and economic growth is frequently unavailable, the Fed has adopted a strategy of _____. The primary motivation behind the creation of the Federal Reserv..
If all capital outlays are funded from retained earnings and new borrowings and if Clynne follows a residual dividend policy, what capital outlays are planned for the coming year?
It is often stated that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the financial statements of a given firm?
Hewett and Hefner, LLP is a regional public accounting firm with 34 offices throughout the south eastern United States. To provide employees with cost-effective continuing professional education, the company maintains an in-house education and traini..
In your opinion, what are the major sources of uncertainty (financial and non-financial) that can affect global logistics and supply chain decisions in auto, electronics, food and retail industries? How can those be mitigated?
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