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An FI manager purchases a zero-coupon bond that has two years to maturity. The manager paid $78 per $100 for the bond. The current yield on a one-year bond of equal risk is 10 percent, and the one-year rate in one year is expected to be either 16.65 percent or 15.35 percent. Either rate is equally probable.
a. Given the expected one-year rates in one year, what are the possible bond prices in one year? With calculations please.
b. Based on the above information, what is the yield to maturity for the two-year bond if held to maturity?
Which of the following does not represent a source of competitive advantage in global marketing?
You want to be a millionaire when you retire in 40 years. How much do you have to save each month if you can earn an 11.4 percent annual return? How much do you have to save each month if you wait 10 years before you begin your deposits?
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You borrow 230,000 to buy a house. The mortgage rate is 4.5 percent and the loan period is 25 years. Payments are made monthly. If you pay the mortgage according to the loan agreement, how much total interest will you pay?
Bond J has a coupon rate of 3 percent and Bond K has a coupon rate of 9 percent. What if rates suddenly fall by 2 percent instead?
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A five--year, $5,000 bond with a 4.5% coupon rate and semiannual coupons is currently trading for a price of $4,876. What is the yield to maturity of the bond?
If a company earns $976,000 worth of taxable income what is the company's average tax rate?
A firm is considering the acquisition of a new machine. The base price is $85,000 and it would cost $15,000 to install. The machine is MACRS 3 year class property and it will be sold after 3 years for $17,000. This firm is in a 34% marginal tax brack..
Suppose at 90 days before expiration, the stock is at 28. Find the value of the chooser option at expiration if the stock price ends up at 50 and at 30.
Consider an asset that costs $810,000 and is depreciated straight-line to zero over its nine-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $185,000. If the relevant tax rate is 30 ..
Discuss decision-making processes in creating a budget. Explain the role of variance analysis in maintaining an operating budget. Differentiate between managerial accounting and financial management. How your recommendation affects employee satisfact..
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