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Suppose that a Detroit municipal bond was bought at issue for $5,000. Its maturity was ten years, the face value was $6,000 and the coupon rate was 5%. a) What was the initial yield to maturity? b) Suppose that in year 5 the coupon was cut to 2% and the face value was cut by $5,250 due to bankruptcy. What annual return did the bond holder experience? Is it greater than or less than the yield ot maturity? Why? c) If the bond holder could have sold in year four at a price of $5,100 (after receiving the year 4 coupon) would s/he have been better off than waiting until year 5 and experiencing the bankruptcy (as described in part b))? Explain.
Recently, which of the following sources of funds has played the greatest role in the financing of U.S. nonfinancial firms?
All cash flows are remitted to the parent. What is the break-even salvage value?
A developer puts in 5% equity and a fund puts in 95% of the equity for a development deal. Cash flow is to be distributed with the following order of priorities (e.g., "the waterfall"): What are the returns to the developer and the fund? What if the ..
What is the slope of the security market line (in percents)?
Grant purchased one call on XYZ stock at an exercise price of $25. The market price of XYZ stock when Grant purchased the call was $24 a share. XYZ is currently priced at $30 a share. Grant paid $120 to buy the call. How much profit will Grant make i..
Assuming continuous compounding, suppose the risk-free rate is 5.96 percent, and the dividend yield on the index is 2.75 percent. Is the futures overpriced or underpriced?
What is the switch break-even point if the firm switched to a net 30 credit policy?
Assume debt proceeds are used to repurchase equity. Ignoring taxes, what will the company’s value be if it sells $33 million in debt?
Using the financial statements and other information that you have for MPR, and assuming a 5% perpetual growth rate in the FCFE, value the equity using the FCFE method.
All else equal, if a bonds yield to maturity increases, it's price will fall. A zero coupon bond pays no interest. It is offered at par value, which is where it sells initially. If the appropriate rate of interest on a bond is greater than its coupon..
The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash flow cycle. Christie’s sales last year (all on credit) were $150,000, and it earned a net profit of 6%, or $9,000...
What are the dynamics that create resistance to change in individuals? In organizations? Visit the library, and locate an article on "resistance to change."
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