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Consider a bond that makes coupon payments in the following manner: no coupon payments are made for 6 years; after that, the coupon rate will be 5% for 5 years; after that, the coupon rate will be 10% for 8 years. Coupon payments are made annually. The bond matures in 19 years and face value is $12,000. ytm is 8%.
a. What is the value of the bond?
b. Find the current yield and capital gains yield for EACH year of the bond. Explain what you observe.
A portfolio that combines the risk-free asset and the market portfolio have an expected return of 26% and a standard deviation of 9%.
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Your friend is considering buying a patio heater for her pub. She thinks that she can extend her patio season by several weeks and make more money. The patio heater costs $2000 but will increase beer profits by $525 per year. If the patio heater has ..
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The Pam American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The new cost of this machine is $45,000. The annual cash flows have the following projections.
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Merton Enterprises has bonds on the market making annual payments, with 16 years to maturity, and selling for $968. At this price, the bonds yield 8 percent.
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