1) Data Corporation has a bond issue outstanding with an annual coupon rate of 7 percent and 4 years remaining until maturity. The par value of the bond is $1,000. Determine the current value of the bond if present market conditions justify a 14 percent required rate of return. The bond pays interest annually.
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2) Refer to Problem #1. Suppose the bond had a semiannual coupon. What would its current value be?
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3) Refer to Problem #1. Assume an annual coupon but 20 years remaining to maturity. What is the current value under these conditions?
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4) Refer to Problem #3. What is the bond's current yield?
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5) Big Corporation's 12 percent coupon rate, semiannual payment, $1,000 par value bonds which mature in 20 years are callable at a price of $1,100 five years from now. The bonds sell at a price of $1,300, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of Big's nominal interest rate on the new bonds?
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6) Refer to Problem #5. Given the same information, what is the rate of return on 1-year T-bonds?
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7) Safe Products has a bond issue outstanding with 8 years remaining to maturity, a coupon rate of 10 percent with interest paid annually, and a par value of $1,000. If the current market price of the bond issue is $814.45, what is the yield to maturity, rd?
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8) You have determined the following data for a given bond: Real risk-free rate (r*)=3%, inflation premium=8%, default risk premium=2%, liquidity premium=2%, and maturity risk premium=1%. What is the nominal risk-free rate, rRF?
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9) Assume that a 3-year Treasury note has no maturity risk nor liquidity risk and that the real risk-free rate of interest falls to 2 percent. A 3-year T-note carries a yield to maturity of 12 percent. If the expected inflation rate is 12 percent for the coming year and 10 percent the year after, what is the implied expected inflation rate for the third year?
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10) Assume that the real risk-free rate is 2 percent that the expected inflation rate during Year 2 is 3 percent, and that 2-year T-bonds yield 5.5 percent. If the maturity risk premium is zero, what is the inflation rate during Year 1?

Solution Summary

This solution provides answers to a few short finance problem.

There is an attachment with 15 shortproblems attached.
Please review the problems and assist with solutions as described.
Must use Excel financial functions when possible.
There is more than 1 tab.
Thanks

Our midterm is going to be similar to problems I have posted. I need assistance in completing these type of problems using excel. Can you please assist?

Why should companies pay attention to short-term finance? What kind of issues would short-term financial planning address?
What causes companies to have the short-term financing needs?
What are the limitations of financial statement analysis?

Address Following:
- Why are ratios useful? What three groups use ratios, and for what reasons?
- What qualitative factors should analysts look for when evaluating a company's likely future financial performance? Explain.
- You are training a new financial analyst who lacks experience. What are the most critical steps of fi

Find the interest rate (or rate of return) in each of the following situations.
You borrow $85,000 and promise to pay back $201,229 at the end of 10 years.
You borrow $9,000 and promise to make payments of $2,684.80 at the end of each of the next 5 years.

Valuing Bonds
Linux has issue a bond with the following characteristics:
Par: $1,000
Time to maturity: 20years
Coupon rate: 8 percent
Semiannual payments
Calculate the price of this bond if the YTM is:
a. 8 percent
b. 10 percent
c. 6 percent.

A) What are some advantages to borrowing short term?
B) Is collateral a means for affecting interest rate?
C) What are some advantages and disadvantages of having a bad credit vs good credit in terms of getting a loan?

When we look at the differences as to why short term loan rates may vary, we cannot overlook 'Discount Rate' loans. These loans require the payment of interest in advance.
For these types of loans, would the interest rate be higher than if the interest was paid in arrears (at the end of the loan term)? Why?

Sample Exam problems July 09.
1. How much do you have to invest today at an annual rate of 8%, if you need to have $5,000 six years from today?
2. Bavarian Sausage, Inc. has preferred stock outstanding. This stock pays a semiannual dividend of $1.25. If the next dividend is paid six months from now and the annual required