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Keys Corporation's 5-year bonds yield 5.70% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the liquidity premium for Keys' bonds is LP = 0.5% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) mc015-1.jpg 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Keys' bonds?
a. 0.60%
b. 0.98%
c. 0.66%
d. 0.69%
e. 0.80%
Negus Enterprises has an inventory conversion period of 70 days, an average collection period of 42 days, and a payables deferral period of 33 days. Assume that cost of goods sold is 80% of sales. Assume 365 days in year for your calculations. What i..
Your firm is contemplating the purchase of a new $545,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $53,000 at the end of that time. You will save $295,000 before..
Samson's purchased a corner lot five years ago at a cost of $640,000. The lot was recently appraised at $820,000. At the time of the purchase, the company spent $50,000 to grade the lot and another $4,000 to build a small building on the lot to house..
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Nicole's Neon Signs, Inc. reported a debt to equity ratio of 1.9 times at the end of 2013. If the firm's total assets at year-end are $100 million, how much of their assets is financed with equity?
During 2003, a sculpture was sold at auction for a price of $10,313,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,370,500. What was his annual rate of return on this sculpture?
You own a portfolio that has $3,600 invested in Stock A and $4,600 invested in Stock B. If the expected returns on these stocks are 10 percent and 13 percent, respectively, what is the expected return on the portfolio?
A share of stock is now selling for $110. It will pay a dividend of $8 per share at the end of the year. Its beta is 1. What do investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 4% and the expected rate of re..
The interest rate on a2 rated bonds was now 6%. $30million 15yr bond issue is outstanding and was initially issued at 9% 5yrs ago. Barton is considering refunding the bond issue. compute price of old bonds in open market, using the valuation procedur..
What is the Black-Scholes delta of a put if the delta of a call on the same stock with the same strike price and maturity is +0.6? Assume that the stock does not pay dividends.
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