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Determinants of Interest Rate for Individual Securities A particular security's default risk premium is 3.90 percent. For all securities, the inflation risk premium is 2.65 percent and the real interest rate is 3.20 percent. The security's liquidity risk premium is .90 percent and maturity risk premium is 1.15 percent.
The security has no special covenants. What is the security's equilibrium rate of return?
What was its return on invested capital (ROIC) in percent?
You work for a small, local telecommunications company. In five years, the company plans to undertake a major upgrade to its servers and other IT infrastructure. Management estimates that it will need up to $450,000 to cover all related costs; Using ..
Your firm is considering a proposed project which lasts 3 years and has an initial investment of 200,000. The after-tax operating cash flows (OCFs) are estimated at $60,000 for year 1, $120,000 for year 2, and $135,000 for year 3
A $1,000 face value bond of Acme Inc. pays an annual coupon, carries a coupon rate of 7.25%, has 31 years to maturity, and sells at a yield to maturity of 6.45%. (a) What interest payments do bondholders receive each year?(b) At what price does the b..
Identify the nature of the bank’s interest rate risk, the agreement rate, and whether the bank is the buyer or the seller of the Forward Rate Agreement.
If you borrow $2,600 and agree to repay the loan in six equal annual payments at an interest rate of 11%, what will your payment be? What will your payment be if you make the first payment on the loan immediately instead of at the end of the first ye..
Actions that maximize profit may not maximize shareholder wealth. What role can the time value of money play in explaining the discrepancy between maximizing profits and maximizing value?
Find the duration of a bond with settlement date June 7, 2016, and maturity date December 7, 2025.
Construct a binomial tree of possible futures values in 4 weeks assuming one week time intervals (i.e., delta t=1/52). (Hint: what is u? What is d?)
In which scenario should a company be most inclined to issue additional debt? Using only the information below, which company likely can produce products more cheaply than its competitors? Company A has Profit Margin of 9%, Current Assets of $300M, C..
If interest is charged on the original principal instead of the unrecovered balance, what is the loan balance after 10 years provided same $21,215.85 payments.
The depreciation is best defined as the: A university converted the bottom 3 floors of an apartment building they own to classrooms. The option that is forgone so that the university can utilize it for classroom is: When a firm is evaluating the intr..
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