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1. A bond portfolio manager holds three bonds in her portfolio. Bond 1 has a market value of $25,000,000 and a duration of 2, bond 2 has a market value of $13,300,000 and a duration of 8,5, bond 3 has a market value of $32,343,000 and a duration of 13. What is the duration of the portfolio?
2. Consider a 25-year 6% coupon bond priced at 70.357 (par value is $100) with yield to maturity of 9%. Compute the approximate duration for a 10 basis point change in yield (use 0.001 for delta y in the approximate duration formula).
Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1=$2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50%, and ..
calculate the price if the bond will be called at the 5th year.
what must the one-year forward rate ($/pound) be according to the approximate covered interest parity?
What are the three principal forms of business organization? What are the advantages and disadvantages of each?
Okazaki Company has $40 million face value zero-coupon bonds due in 9.5 years, and its σ is 0.371. The total market value of Okazaki Company is $230 million and the riskless rate is 2.9%. The stock of the company sells at $32 per share. Find the numb..
Bond Valuation Assume the following information for an existing bond that provides annual coupon payments: What is the present value of the bond? If the required rate of return by investors were 14 percent instead of 11 percent, what would be the pre..
A firm’s balance sheet contains $320 of cash, $2,000 of fixed assets, What is the company’s quick ratio? What is the company’s book value?
Suppose that you have a choice to receive a lottery payout in two different payment streams: Interest rate is 3% per year. Which choice would you prefer?
A firm evaluates all of its projects by applying the IRR rule. Setup the IRR formula and solve it using either your calculator or a software program such as Excel. If the required return is 15%, should the firm accept the following project?
If you were looking for a bond to purchase and hold for several years, would you buy this bond?
Investors require a 13% annual return on the stock. How much is one share of stock worth today?
Consider the following capital market: a risk-free asset yielding 0.75% per year and a mutual fund consisting of 70% stocks and 30% bonds. The expected return on stocks is 10.75% per year and the expected return on bonds is 3.25% per year. The standa..
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