Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
You want to buy a 3 year bond with a coupon rate of 22%, annual coupons, and a face value of 1000. You know that 1 year zero coupon bonds (ZCBs) trade a yield to maturity of 12%, 2 year ZCBs trade at a yield to maturity of 9%, and 3 year ZCBs trade at a yield to maturity of 7.5%.
(a) What is the price of this 3 year 22% coupon rate bond?
(b) What is the yield to maturity on this 3 year 22% coupon rate bond?
(c) What does the market expect the rate on a 1-year zero coupon bond will be two years from now (what is the implied forward rate)?
(d) What does the market expect the rate on a 2-year zero coupon bond will be one year from now?
(e) Assume you buy the coupon bond and then you decide you do not need money until the end of three years. As a result, when you receive the coupons in years 1 and 2, you will reinvest them at the prevailing market rate (assume these will be the forward rates you calculated in parts c and d). How much money will you have at the end of the 3 years? What rate of return will you receive on your investment?
The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $26,000 per year forever. Suppose a sales associate told you the policy costs $471,000. At what interest rate would this be a fair deal?
What is the relationship of specialized budgets to the comprehensive budget?
Redneck Farm Equipment owes $48,329 in tax on a taxable income of $549,600. The company has determined that it will owe $56,211 in tax if its taxable income rises to $565,000. What is the marginal tax rate at this level of income?
In 2009, Mr. Smith purchased a principal residence for $1,500,000. He made a down payment of $300,000 and financed the remainder by borrowing $1,200,000 through a loan secured by the residence. In 2009, Mr. Smith paid interest that accrued on the ind..
You find a home that you can purchase for $280,000. You make a 20 percent down-payment on the home. You find a savings bank that will write a loan for 30 years at a 4.5 percent annual rate with monthly payments that include interest and principal. Ca..
An insured municipal bond bears a lower cost to the borrower than does an equivalent uninsured bond because:
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eleven years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $15.00 per share 12 yea..
Breads uses specialized ovens to bake its bread. One oven costs $189,000 and lasts about 7 years before it needs to be replaced. The annual operating cost per oven is $23,800. What is the equivalent annual cost of an oven if the required rate of retu..
The risk-free rate and the expected market rate of return are 5% and 10% respectively. According to the Capital Asset Pricing Model (CAPM), the expected rate of return on security X with a beta 1.2 is equal to
During the current year, M sold a piece of real estate. The sale produced a recognized gain of $50,000. He had held the real estate for the five-year period preceding the sale. M's prinicipal trade or business is that of an attorney. Over the two-yea..
A price level adjusted mortgage (PLAM) has the following terms: loan amount: $128,000, real interest rate: 5.50%, 30-year term, 2.50 discount points, annual payments adjustments, monthly payments, observed inflation end of year one (EOY1): -3%, obser..
Union Local School Distract has bonds outstanding with a coupon rate of 3.5% paid semiannually and 13 years to maturity. The yield to maturity on these bonds is 2.5% and the bonds have a par value of $10,000. What is the price of the bonds?
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd