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Suppose that Ally Financial Inc. issued a bond with 10 years until? maturity, a face value of $1,000, and a coupon rate of 9% (annual payments). The yield to maturity on this bond when it was issued was 7%.
a. What was the price of this bond when it was issued?
b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?
c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?
An all equity firm generates cash flows (CFFA) of $100 million every year in perpetuity. Based on the risk of the cash flows, a discount rate of 20% is appropriate for the firm. The firm is considering a project that will require an investment of $75..
Calculate the differences in cost and risk. Explain why the costs and risks of external financing are important for the organization to understand.
Norris Production Company (NPC) is considering a project that has an up-front cost at t = 0 of $2,500. (All dollars in this problem are in thousands.) The project's subsequent cash flows are critically dependent on whether a competitor's product is a..
What is the effective rate of interest?
We receive $3,000 per semester and $87,000 in 9 years from the present. What ROR did we attain, if we now invest $4,000? We buy an asset for $20,000. We receive money to the tune of ___ per month.
Nowlin Pipe & Steel has projected sales of 29,400 pipes this year, What is the economic ordering quantity? What will the average inventory be?
How much does Fred have to put into the trust fund today in order to fund the series of annual payments?
What action do you need to take to speculate in the forward market? What is the expected profit for CAD100,000?
Bill’s Bakery expects earnings per share of $3.14 next year. Current book value is $5.1 per share. The appropriate discount rate for Bill’s Bakery is 13 percent. Calculate the share price for Bill’s Bakery if earnings grow at 4.8 percent forever.
Interest on certain deposits is compounded monthly. Find the nominal rate of interest (per annum) for these deposits if the APR is 15%.
The risk-free rate is 6.0% and the expected return on the market portfolio is 12.0%. Asset A has a beta of 0.75 and an expected return of 10.0%. Asset B has a beta of 1.30 and an expected return of 14.0%. Under the CAPM, investors should:
The two requirements for transaction exposure are.
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