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Which pays interests semi-annually. The modified duration is 3.9944 years and convexity measure is 19.7636 years. (Assume par value is $1000). Coupon rate: 9%, current yield to maturity: 8%, maturity: 5 years. (1) Calculate the price value of a basis point if the new yield to maturity becomes 8.01% (2) Calculate the actual price of the bond for a 50-basis-point increase in interest rates (yield changes from 8% to 8.5%) (3) Using duration, estimate the approximate price of the bond for a 50-basis point increase in interest rates (yield changes from 8% to 8.5%) (4) Using both duration and convexity measure, estimate the approximate price of the bond for a 50-basis-point increase in interest rates (yield changes from 8% to 8.5%) (5) Compare your results in (3) and (4) and explain which is closer to the actual price in (2).
Investigate in detail the provisions of the Sarbanes-Oxley Act of 2002 (SOX) from the Internet, periodicals, or academic journals.
what should be the spot rate for the euro one year from now?
What is the after-tax holding-period return on the bond? Use the tax rates in part (b) to compute the after-tax two-year realized compound yield.
What does this problem tell you about the interest rate risk of longer-term bonds?
Is the stock under- or overvalued at this price? What if the forward dividend growth rate is more aggressively assumed at 4.7 % ?
Stewart Industries just paid a $3.00 per share dividend on its common stock yesterday (i.e., D0 = $3.00). The dividend is expected to grow 20 percent a year for the next four years, after which time the dividend is expected to grow at a constant rate..
Last year (2011), Bourne Company installed new factory equipment. The owner of the company, Jason Bourne, recently returned from an industry equipment exhibition where he watched computerized equipment demonstrated. He was impressed with the equipmen..
Caughlin Company needs to raise $55 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. Flotation costs for issuing new common stock are 7 percent, for..
Assume that you bought 5-ycar,, 15-year, and 25-year bonds, all with a 10 percent coupon rnte and semiannual coupons, at their $1,000 par values. Which bond's value would the most affected if interest rates rose to 13 percent? Which would ho least af..
The Grantor, age 70, is interested in removing an income-producing asset with significant appreciation potential from her estate.
Interest-on-Interest and Moving Cash Flows. How much total interest is earned on the original deposit (excluding interest earned on interest)?
A firm wants a sustainable growth rate of 3.03 percent while maintaining a 25 percent dividend payout ratio and a profit margin of 4 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the f..
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