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A newly issued bond has a maturity of 4 years and pays a 7% annual coupon. The current discount rate is 6.75%, and the face value is $1000.
(a) What is the price of this bond?
(b) What is the duration of the bond?
(c) Find the price of this bond if rates decrease by 1 bp (basis point) using the duration rule for price sensitivity. Then, re-price the bond using the normal bond pricing formula or your financial calculator. How much is the pricing error from the duration rule?
(d) Perform the same steps for a 100 bp decrease in interest rate. What is the pricing error now?
(e) What is the name of the effect that is causing what you are observing?
Bullseye, Inc.'s 2008 income statement lists the following income and expenses: EBIT = $703,500, Interest expense = $53,000, and Taxes = $220,500. Bullseye's has no preferred stock outstanding and 270,000 shares of common stock outstanding. What are ..
Consider Ford stock (F) with a current price of $20 per share and a standard deviation of returns of 15%. An investor expects to sell Ford stock in one year at $21 per share and expects the firm to pay a dividend of $1 per share at the end of the yea..
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for this assignment you are being asked to consider ethical issues in public health and health services. using course
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Which of the following is a drawback or potential limitation to Yield-to-Maturity:
What is the approximate yield to maturity for a $1000 par value bond selling for $925 that matures in 8 years and pays a 10 percent coupon that is paid semiannually? What is the current price of a $1000 par value bond maturing in 12 years with a coup..
An investment fund accumulates with force of interest dt = K 1+(1-t)K for 0 = t = 1.
Calculate the rate of return (ROI) represented by this cash flow to three significant figures. which would be the best year and what would be the new ROI
Calculate the cost of equity using the SML method.
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