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Consider two bonds, a 3-year bond paying an annual coupon of 6% and a 10-year bond also with an annual coupon of 6%. Both currently sell at a face value of $1,000. Now suppose interest rates rise to 10%.
a. What is the new price of the 3-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What is the new price of the 10-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
The treasurer of a major U.S. firm has $21 million to invest for three months. The interest rate in the United States is .21 percent per month. The interest rate in Great Britain is .26 percent per month. The spot exchange rate is £.621, and the thre..
When the prepayment premium is paid by a borrower in a commercial mortgage back security what is the bondholders concern?
What is the incremental operating profit the firm can expect to earn from the ad? campaign?
An all equity firm generates cash flows (CFFA) of $100 million every year in perpetuity. Based on the risk of the cash flows, a discount rate of 20% is appropriate for the firm. The firm is considering a project that will require an investment of $75..
At what interest rate would the firm be indifferent between the two projects? Which project is better if the WACC is above the interest rate? Why?
Which one of the following will occur when the internal rate of return equals the required return? Explain why?
What is the value (price) of this bond if your required rate of return (the annualized nominal yield to maturity) is 9.68%?
Michelle and Ken Dunn, both in their mid-20s, have been married for 4 years and have two preschool-age children. Ken has an accounting degree and is employed as a cost accountant at an annual salary of $62,000. They’re now renting a duplex but wish t..
How much more is the property worth to you with the seller financing?
Suppose a stock had an initial price of $64 per share, paid a dividend of $1.20 per share during the year, and had an ending share price of $73. Compute the percentage total return.
Earnings persistence and earnings quality, Estimate the intrinsic value vs. the market price.
Manteca Co. issues only common stock and coupon bonds. The firm has a debt-equity ratio of 1/3. The cost of equity is 13.7 percent and the pre-tax cost of debt is 9.4 percent. The tax rate is 35 percent. What is its weighted average cost of capital (..
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