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Junk Corp.'s high-yield bond has the following features: Principal $1,000 Coupon 10% Maturity 5 years Special features: Company may extend the life of the bond to 10 years a) If interest rates are currently 12 percent on comparable high-yield securities and are not expected to change, what is the price of this bond? b) If interest rates are currently 9 percent on comparable high-yield securities and are not expected to change, what is the price of this bond? c) If interest rates are currently 9 percent on comparable high-yield securities but the investor has no forecast as to future rates, what is the possible range of prices for this bond?
What is different between how treasury bonds are traded in ASX with how they traded in Australian bond market?
The lease terms, which include maintenance, call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%.
Allied products uses the MACRS depreciation schedule (seven-year property class). The immediate initial working capital requirement is $2 million thereafter the net working capital requirement would be 5% of sales.
Do you feel that the three-stock portfolio is sufficiently diversified or does it still have risk that can be diversified away? Explain.
A U.S. firm has total assets valued at €125,000 located in Germany. This valuation did not change from last year. Last year, the exchange rate was €1.1 = $1. Today, the exchange rate is €0.8 = $1. By what amount did these assets change in value on th..
It is April and a trader buys 100 September put options with a strike price of $21. The stock price is $17.63 and the option price is $4.74. At the expiration, the stock price becomes $18.01. Calculate the option profit to the trader.
Explain how companies with substandard financial history can draw the attention of investors. Are investors irrational or naieve?
An investment has an installed cost of $567,382. The cash flows over the four-year life of the investment are projected to be $196,584, $240,318, $188,674, and $156,313.
Intercontinental Baseball Manufacturers (IBM) has an outstanding bond with a $1,000 face value that matures in 10 years. The bond, which pays $25 interest every six months ($50 per year), is currently selling for $598.55. What is the bond's yield ..
Calculate the minimum cash flow that could be received at the end of year three to make the following project acceptable. Initial cost is $100,000; cash flows at end of years one and two is $35,000.
Explain the advantages and disadvantages of these three valuation methods:
You have the opportunity to purchase mineral rights to a property in North Dakota with expected annual cash flows of $10,000 per year for eight years. If you discount these cash flows at a rate of 12% per year.
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