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1. A 30-year bond issued 15 years ago with a face value of $1000 is currently trading at $864.10. The bond pays semi-annual coupons at the coupon rate of 6%. What is your YTM?
2. You bought a bond paying semi-annual coupons with face value of $1000 and the annual coupon rate of 9% two years ago for $ 10086.46. What was your holding period return (HPR) on the bond over the past two years, if the current YTM is 7%, the remaining maturity on the bond is 13 years and you were able to re-invest coupons in the past two years at 6%? (Provide your answer in percentage without the % sign)
3. You bought a bond that pays semiannual coupons at the coupon rate of 6%. The bond's par value is $1000. Three years later you sell the bond. What is the future value of the coupons earned in these three years, if you can reinvest coupons at 4% rate?
Consider a 8.4 percent coupon bond with eleven years to maturity and a current price of $1,041.40. Suppose the yield on the bond suddenly increases by 2 percent. a. Use duration to estimate the new price of the bond. Calculate the new bond price.
Short term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is this statement true or false? Explain.
Use a two-step tree to value an American put option on the stock with a strike price of $48 that expires in 12 months.
Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and non-quantitative facts best predict bond defaults. Furthermore, some of the raters invest time and money to meet privately with corporate pe..
A stock has an expected return of 12.4 percent, its beta is 1.17, and the risk-free rate is 4.2 percent. What must the expected return on the market be?
Explain examples of successful and unsuccessful pharmaceutical medications
Goodbye, Inc., recently issued new securities to finance a new TV show. The project cost $13.3 million, and the company paid $655,000 in flotation costs. If the company issued new securities in the same proportion as its target capital structure, wha..
What are the yield to maturity and the yield to call of a 20 year, 8% bond that is selling for $1150 has a call value of $1100 in year 6? Which will the investor make? We buy a 15 year, 10% bond yielding 9%. We sell it after 4 years when market rates..
Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, a..
A dividend was issued of $3.75 per share. Expected growth of 20% for next 5 years. after that the growth rate is expected to be 6% forever. If investors require a return of 8% for investing in the stock of companies of similar risk, what is the value..
Consider a world of perfect capital markets. This world has no corporate or personal taxes, all investors have homogeneous expectations, no bankruptcy costs, and M&M’s no-tax theory of capital structure is true. What is the firm’s return on equity? W..
What is the beta of Stock A given the following returns of the market and Stock A in two states of the economy? Market Return (%), State of the Economy, Normal 15%, Recession 5%. Stock A Return (%), State of Economy, Normal 20%, and Recession 6%.
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