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What is the maturity risk premium on a 5 year bond?

5 year bond yield 6.50%, and 5 year T bond yield 4.40%, real risk-free rate is r*=2.5%, default risk premium bonds DRP = 0.40%, liquidity premium is LP 1.7%, versus 0 on T bond, inflation premium is 1.5%, What is the maturity risk premium on a 5 year bond?

Calculations, TVM, Mill Rates, P/E Ratios, & Business Strategy

Jose, Paul, and Dan went fishing. It was a good day, and all three caught a fish. Dan's fish weighed four times as much as Paul's fish, and Jose's fish weighed half as much as Dan's fish. Altogether, the three fish weighed 21 pounds. How much did each fish weigh? What is the future value of an ordinary annuity of $23,000 per

Residual Dividend Policy Dividend and Payout Ratio

Fletcher Corp. has a capital budget of $1,000,000, but wants to maintain a target capital structure of 60% debt and 40% equity. The company forecasts this years net income to be $600,000. If the company does follow a residual dividend policy, what will be its dividend paid? What will be its dividend payout ratio?

ROE's

Firms A and B are identical except for their level of debt and the interest rates they pay on debt. Each has $2 million in assets, $4000 of EBIT, and has a 40% tax rate. Firm A has a debt-to-assets ratio of 50% and pays 12% interest on its debt, while Firm B has a 30% debt ration and pays only 10% interest on its debt. What i

Call Premium

Buchanan Corp. is refunding $12 million worth of 10% debt. The corporation's tax rate is 35%. The call premium is 9%. What is the net cost of the call premium? (Show all work/formulas/calculations)

Stock Holder Equity after the Share Split

Question 12 The stockholders' equity section of the balance sheet of the XYZ Corp. is as follows: Common Stock ($5 par) $ 20,000,000 Retained Earnings $176,000,000 Total $196,000,000 Assume that the company now splits its stock 5-for-1, show the resulting stockholder's equity section.

Zoro Sword Company

Need steps to work out problem. Zoro Sword Company bonds pay an annual coupon of 9 1/2%. They have 8 years to maturity and face value or par of $1000. Compute the present value of Zoro bonds if investors' required rate of return is 10%.

Selling Price of a Bond and Present Value of 1 Factor

On December 31, 2007, $490,000of 9% bonds were issued. The market interest rate at the time of issuance was 6%. The bonds pay interest on June 30 and December 31 and mature in 12 years. Compute the selling price of a single $1000 bond on December, 31 2007. What is the "present value of 1 factor"?

Determining Profit: Karla Harby Communications

Karla Harby Communications, a small company of science writers, found that its rate of profit (in thousands of dollars) after t years of operation is given by the function: P'(t)=(3t + 3) cuberoot(t^2 +2t +2) a) Find the total profit in the first three years. b) Find the profit in the fourth year of operation c) What

Probability Tree & Joint Probability Table

A retail outlet receives radios from three electrical appliance companies. The outlet receives 20% of its radios from A, 40% from B, and 40% from C. The probability of receiving a defective radio from A is .01; from .02; and from C .08. A. Develop a probability tree showing all marginal, conditional and joint probabilities.

Supply and demand - Equilibrium Price and Quantity

The following relation describes the monthly demand and supply for a computer support service, catering to small businesses: Qd = 3,000 - 10P Qs = -1000 + 10P 2a) At what average monthly fee would demand equal zero? 2b) At what average monthly fee would supply equal zero? 2c) What are the equilibrium price and equ

Statistic

The following dtables provide information about the top women-owned businesses in the U.S. The first table gives year 2000 revenue in millions of dollars and number of employees for Pennsylvania women-owned companies with year 2000 revenues of $70 million or higher. The second table gibes the same information for Michigan women-

Compute profit margin

ABC Company Income Statement for 1998 1. Sales.........................................................3,000,000 2. Cost of Goods Sold....................................2,100,000 3. Gross Profits..............................................900,000 4. Selling and admin expense......................450,000 5. D

Math Problems: Application Practice

Application Practice: Answer the following questions to the problem. 1. In this problem, we will analyze the profit found for sales of decorative tiles. A demand equation (sometimes called a demand curve) shows how much money people would pay for a product depending on how much of that product is available on the open market

Leasing

Mike Macinski Leasing Company leases a new machine that has a cost and fair value of $95,000 to Sharrer Corporation on a 3-year noncancelable contract. Sharrer Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and maintenance. The machine has a 3-year useful life and no residu

Application methods for Financial Management

Provide calculations, Excel solutions, and step by step instructions for the following problems: 1. At the end of January, a parts firm had an inventory of 825 units, which cost $12 per unit to produce. During February, the company produced 750 units at a cost of $16 per unit. If the firm sold 1,050 units in February, what w

Supply and Demand Decision for transportation problem

Supply and Demand Decision Several companies use warehouse inventory to stock company stores to serve the buyers. Shipping fees are a significant cost to the company. Ample Computers has warehouses in Chicago, New York, and San Diego. The firm owns company-owned, retail stores in Houston, Indianapolis, and Miami. Each wareh

Statistical process controls using quantitative tools

Please help with the following business math problem. Include at least one reference as part of the solution. Using quantitative tools is one way to manage data. What kind of solutions may be derived using various statistical process controls (SPC)? Why is SPC training important to both company employees and managers?

Stock Trading: Payoff of a Call

Scenario: You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months time. Questions: a. If the stock is trading at $55 in three months, what will be the payoff of the call? b. If the stock is trading at $35 in three months, what will be the payoff of the call? c. Draw

Corporation Considering a Capital Project

A Corporation is considering a capital project for the coming year. The project has an internal rate of return of 17 percent. If the firm has the following target capital structure and costs, what should their decision be and why? Source of Capital Proportion After-tax cost ______________________________

Monthly Savings

A new parent wants to have $80,000 in a college savings account in 18 years. Although it's difficult to predict what the APR will be over 18 years, we can get a sense of how much the parent should save each month using various assumptions. Calculate the monthly savings needed if the money is invested in an account with monthly

After tax comparison

The Shelton Corporation has some excess cash that it would like to invest in marketable securities for a long term hold. Its vice president of finance is considering three investments. (Shelton Corporation is in a 35percent tax bracket and the tax rate on dividends is 15 percent). Which one should he select based on after-tax

Dividends & Stock Valuation

A company pays a dividend today of $4, and this dividend is expected to grow each year by 4%. The discount rate is 10%. What is the market price of the stock? A firm issued a preferred stock which matures in 30 years and carries a maturity value of $45. The dividend is $4 per year over the 30 year period. The current mark

Short-term investment horizon

Assume that you have a short-term investment horizon (less 1 year). You are considering two investments: a 1-year Treasury security a 20-year treasury security. Which of the two investments would you view as being riskier? Explain