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Changes in the bond value is inversely related to the change in the interest rates. If an investor holds a long bond position, he would incur loss if the interest rates increase and an investor who holds a short bond position would incur loss if the interest rates decreases. It is very important for a manager to quantify the outcome of a rate change in order to control interest rate risk. To measure interest rate risk exposure properly, a reliable valuation model is to be used. Valuation model helps to accurately determine the value of a position after an adverse rate move.
The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net income
solution to assignement
Discuss risk from the perspective of the Capital Asset Pricing Model (CAPM). The Capital Asset Pricing Model or CAPM be able to be used to compute the appropriate required rate
Q. Major proportion of the maximum financing requirement? Whether the credit terms themselves is able to be changed may depend upon the credit terms of competitors when set alo
FUNCTIONAL AREAS OF FINANCIAL MANAGEMENT The scope of financial management is all pervasive and covers approximately all the functional areas of an organization. A number of t
Q. Describe the Dividend Yield Method? Dividend Yield Method: - This process is based on the assumption that when an investor invests in the equity shares of a company he expec
Is there an optimal capital structure? What is it and how can it be calculated? There is no optimal capital structure. Capital structure is a variable which depends on the incl
explain financing under fireign currency
Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain. Bankers and other lenders use liq
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