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BOND VALUATION
An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 12% annual coupon. Bond L matures in 14 years, while Bond S matures in 1 year.
Assume that only one more interest payment is to be made on Bond S at its maturity and that 14 more payments are to be made on Bond L.
What will the value of the Bond L be if the going interest rate is 4%? Round your answer to the nearest cent.
What will the value of the Bond S be if the going interest rate is 4%? Round your answer to the nearest cent.
What will the value of the Bond L be if the going interest rate is 8%? Round your answer to the nearest cent.
What will the value of the Bond S be if the going interest rate is 8%? Round your answer to the nearest cent.
What will the value of the Bond L be if the going interest rate is 13%? Round your answer to the nearest cent.
What will the value of the Bond S be if the going interest rate is 13%? Round your answer to the nearest cent.
Calculate the weighted average cost of capital (WACC given a tax rate of 30% The firm's WACC is | |96.
Other things held constant, which of the following events would be most likely to encourage a firm to increase the amount of debt in its capital structure? Its sales are projected to become less stable in the future. The bankruptcy laws are changed i..
What is the present value of the payments if they are in the form of an ordinary annuity? What is the future value if the payments are an ordinary annuity?
Two firms have the same asset beta (Ba) and a tax rate but different equity Betas. The firm with the higher equity beta must employ more financial leverage.
During the last year, Globo-Chem Co. generated $1170 million in cash flow from operating activities, and had negative cash flow generated from investing activities (-$640 million). At the end of the second year, Globo Chem Co. had $200 million in cas..
Jordan Jones (JJ) and Casey Carter (CC) are portfolio managers at your firm. Each manages a well-diversified portfolio. Your boss has asked for your opinion regarding their performance in the past year. JJ's portfolio has a beta of 0.6 and had a retu..
Draw a diagram illustrating how the investor’s payoff and profit or loss at expiation.
Determine the current value of your total investment. Do not make any changes to your investment at this time. Calculate your total based on the number of shares and the new price per share, for each company.
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air ..
AWM Corporation expects its common stock dividend to grow at a constant 5 percent for the foreseeable future. The company recently paid a $4.00 dividend. If the required rate of return on the company's stock is 11 percent, what is the value (price) o..
California issued debt (general obligation bonds) to fund the state budget and must now repay what it borrowed. Given the facts above, please indicate if you think that California’s debt is more likely to be internal or external. How do you know? Fur..
What do you think are the ethical limits that managers should observe when taking risk with other people's money?
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