User Account

All Pages

What is the inflation premium

Assignment Help Financial Management
Reference no: EM13976617

You are considering an investment in 30-year bonds issued by Envision Corporation. The bonds have no special covenants.  The Wall Street Journal reports that one-year T-bills are currently earning 3.25 percent. Your broker has determined the following information about economic activity and Envision Corporation bonds:

Real interest rate is 2.20%

Default risk premium is 1.00%

Liquidity risk premium is 0.50%

Maturity risk premium is 1.75%

a. What is the inflation premium?

b. What is the fair interest rate on Moore Corporation 30-year bonds?

Reference no: EM13976617

Questions Cloud

What is the present value : What is the present value of $2,525 per year, at a discount rate of 8%, if the first payment is received 6 years from now and the last payment is received 27 years from now?
What information is needed for the database : What is the topic or workplace issue or element for your database? What information is needed for the database? How often will data need to be inputted into the database
Record the transactions in a general ledger : Record the transactions in a general ledger
Present values and interest rates and between present values : Assume you received $8,000 five years from today. Calculate the present value of the $8,000 if your investments pay. Discuss your answer. Specifically, what do your answers to these questions tell you about the relation between present values and int..
What is the inflation premium : You are considering an investment in 30-year bonds issued by Envision Corporation. The bonds have no special covenants.  The Wall Street Journal reports that one-year T-bills are currently earning 3.25 percent. What is the inflation premium? What is ..
Empirical rule what percentage of funds : You have determined that u the mean one year total percentage return achieved by all the funds is 6.80 and that o the standard deviation is 2.75 according to the empirical rule what percentage of these funds is expected to be within 3 standard dev..
Calculate the yield to maturity for bond x below : Calculate the yield to maturity for bond X below. Assume a US bond, which typically has the convention that coupons pay semi-annually. Keep at least two decimal places of accuracy in your answer, e.g. 4.36%
This will be an annuity of cash flows : What is the present value of $2,525 per year, at a discount rate of 8%, if the first payment is received 6 years from now and the last payment is received 27 years from now? No cash flows will be received for the first 6 years. This will be an annuit..
Inventory control system-what is economic ordering quantity : Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of $8 per order, and carrying costs of $1.60 per unit. Wha..

Reviews

Write a Review

Financial Management Questions & Answers

  Makes no coupon payments over the life of the bond

The McKeegan Corporation has two different bonds currently outstanding. Bond M has a face value of $11,000 and matures in 20 years. The bond makes no payments for the first 8 years, then pays $800 every six months over the subsequent 4 years, and fin..

  Managerial planning process for the company

Determine whose rate of return (i.e., local or parent currency returns) the company you researched should use when evaluating foreign direct investment opportunities and justify the position.

  Best employees from private employment agencies

For the past years, Saveo has obtained its best employees from private employment agencies. now that it has three additional jobs to fill, it will probably continue to use

  Preparation relevant cash flows for your new investment

You want to use a building your company owns to develop a new investment opportunity. You have checked with property management in your company, and have consulted a few commercial brokers. What best describes how this should be treated in your prepa..

  Expansion project-requires initial fixed asset investment

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.49 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..

  With no corresponding increase in current liabilities

Provo, Inc., had revenues of $10,000,000, cash operating expenses of $5,000,000, and depreciation and amortization of $1,000,000 during 2015. The firm purchased $500,000 of equipment during the year while increasing its inventory by $300,000 (with no..

  Across an asset that pays no dividends

You have come across an asset that pays no dividends but has an expected price of $100 an year from now. The correlation of this asset with the market portfolio is believed to be 0.5. The standard deviation of the return is believed to be 30%.

  Cash budget and the pro forma income statement

Is it possible for the cash budget and the pro forma income statement to have different results?

  Choose an item that you would like to manufacture nbspyou

choose an item that you would like to manufacture. nbspyou do not actually need to manufacture something but will

  Considering a financial restructuring

Talus Inc. is considering a financial restructuring. Talus estimates its cost of debt is 7% and its cost of equity is 13%. Talus is considering issuing additional shares of stock in order to retire some of its debt. If Talus is currently financed wit..

  About mergers and acquisitions and taxes

In a statutory merger, only assets and liabilities shown on the target firm’s balance sheet automatically transfer to the acquiring firm. Which of the following is not true about mergers and acquisitions and taxes? Which of the following is not true ..

  What is your incremental cash flow from selling the machine

You purchased a machine for $1.06 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 35%. If you sell the machine today (after three years of depreciation) for $779,000, what is y..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd