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1. The yield curve shows that the one-, two-, and three-year interest rates are 4.0%, 6.1% and 7.6%, respectively. What is the piece of a three-year bond with a face value of 700 and coupons of 14% paid annually?
2. Put-Call Parity states: c + Xe -rT = p + S0 What is the implication if this relationship does not hold? (10) Show diagrammatically that put-call parity must hold.
3. Osborn corporation currently does not pay any dividend. Analysts expect taht the company will pay its first dividend of $5 per share at the end of year 4. After that, the company will continue to pay this dividend at the end of each year for the foreseeable future. What it the value of the stock today if the required rate of return is 10%?
ABC, Inc. is considering a project that requires $21,000 in net working capital and $121,000 in fixed assets, which will be depreciated straight-line to zero over the three-year life of the project. The fixed assets have a salvage value of 28,500. Th..
The Saunders Investment Bank has the following financing outstanding. Debt: 120,000 bonds with a coupon rate of 8 percent and a current price quote of 110.0; the bonds have 20 years to maturity. Preferred stock: 210,000 shares of 6 percent preferred ..
What is meant by risk/return trade-off? Does this trade-off hold in all markets?
A compay is expected to have earnings of $1.54 per share in one year, $1.88 per share in two years, and $2.22 per share in three years. The dividend payout ratio is also expected to remain at 30% over the next three years. The leading P/E ratio is ex..
"Champion Chemical Corporation is planning to expand one of its propylene -manufacturing facilities. Assume that all figures represent effect of income tax.
On May 8, 2013, an investor owns 100 Google shares. As indicated in Table 1.3, the share price is about $871 and a December put option with a strike price $820 costs $37.50. The investor is comparing two alternatives to limit downside risk. Discuss t..
Cheeseburger and Taco Company purchases 19,632 boxes of cheese each year. It costs $29 to place and ship each order and $3.81 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is t..
The Robinson Corporation has $43 million of bonds outstanding that were issued at a coupon rate of 11 3/4 percent seven years ago. Interest rates have fallen to 10 3/4 percent. Compute the discount rate. Calculate the present value of total outflows...
Ben Bernanke admits that, Ben Bernanke states that. According to Ben Bernanke, bad mortgage practices included all of the following EXCEPT
During the past year, the consumer price indexes (CPI) of the United States and the Eurozone rose by 1 percent and 3.5 percent, respectively. If PPP holds, what is the percentage change in the value of the EUR over the same time period? (use p.pp%)
Ten-year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000 and interest is compounded semiannually. If similar bonds in the market yield 9.59 percent, what is the value of these bonds?
Consider the following three options on the Generous Dynamics: -- Call option with strike price 100.0 and price 39.5 -- Call option with strike price 125.0 and price 25.398 -- Call option with strike price 150.0 and price 15.732. What is the cost of ..
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