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Consider a bond paying a coupon rate of 10.25% per year semiannually when the market interest rate is only 4.1% per half-year. The bond has four years until maturity.
a. Find the bond's price today and six months from now after the next coupon is paid. (Do not round intermediate calculations. Round your answers to 2 decimal places.) current price______
price after 6 months______
b. What is the total rate of return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Total rate of return % per six months
Blooper Industries must replace its magnesium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $12 million. The system will last 3 years. Do-It-Right sells a sturdier but more expensive system for $18 millio..
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings;
Suppose Blek stock has a beta of 1.7, whereas Gell stock has a beta of 0.96. If the risk free interest rate is 4.2% and the expected return of the market portfolio is 13.4%, according to the CAPM, What is the expected return of Blek stock? What is th..
Cecelia Thomas is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $3,800 every year in an IRA account, beginning at the end of this year until she turns 65 years old. If the IRA investment will earn 8.10 percent annuall..
You have just taken over as a fund manager at a brokerage firm. Your assistant, Thomas, is briefing you on the current portfolio and states "We have too much of our portfolio in Alpha. Even if the probabilities for different states of economy (expans..
The used equipment can be sold today for $4 million, and its tax rate is 40%. What is the equipment's after-tax net salvage value?
Find the amount of each payment to be made into a sinking fund so that enough will be present to accumulate the following amount. Payments are made at the end of each period. $75,000; money earns 6% compounded monthly for 7 years.
You are working on the valuation for an upcoming IPO. The company that wants to sell its stock expects the following future free cash flows (FCF, in millions of dollars): -6 in year 1, 5 in year 2, 16 in year 3, and cash flows are expected to grow st..
If the chosen firm attempts to grow faster than its sustainable growth rate with modest increases in its debt ratio, how will this likely affect its WACC? What about very large increases in its debt ratio? Explain.
Assume that a firm belongs in a risk class for which the appropriate capitalization rate, ρc , is 12%, and the firm has $1,000,000 worth of debt and $5,000,000 worth of stock outstanding. If the riskless interest rate is 6%, what is this firm’s cost ..
You have just made your first $4,000 contribution to your individual retirement account. What will your account be worth when you retire in 45 years?
Which one of the following markets involve liquid securities with standardized contract features such as stocks and bonds?
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