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Consider a corporate bond with two years to maturity with coupon rate 10%, paid once a year, and par value of 1000. Assume that there is a probability of 1 that the first coupon will be paid and a probability of 75% that the second coupon and the par value will be paid. There is a 25% probability that the bond will pay 0 at the end of the second year. Assume that bonds with similar rating have an average YTM of 40%.
1. What is the bond’s price?
2. What is the expected realized yield of the bond, assuming that it is known that the interest rate will be 8% next year?
A project is estimated to have a net present value equal to $85,000. The risk-adjusted opportunity cost of capital is 15 percent. Which of the following statements is most correct?
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During 2009, Raines Umbrella Corp. had sales of $736,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $574,000, $104,000, and $132,000, respectively. In addition, the company had an interest expense of $100..
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Present value with periodic rates. Cooley Landscaping needs to borrow ?$30,000 for a new? front-end dirt loader. The bank is willing to loan the money at 7?% interest for the next 8 years with annual?, semiannual?, quarterly?, or monthly payments. Wh..
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Nolen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50% per share. at what price should the preferred stock sell?
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