Finance questions: modified IRR method, 10-year corporate bonds, total return on bonds and more...
Not what you're looking for?
The modified IRR (MIRR) method overcomes the problems of cash flow timing and project size that lead to criticism of the regular IRR method
A) true
B) false (correct)
A 10-year corporate bond has an annual coupon payment of 9 percent. The bond is currently selling at par ($1,000). Which of the following statements is most correct?
a. The bond's yield to maturity is 9 percent.
b. The bond's current yield is 9 percent.
c. If the bond's yield to maturity remains constant, the bond's price will remain at par.
d. Statements a and c are correct.
e. All of the statements above are correct. (correct)
The total return on a bond for a given year arises from both the coupon interest payments received for the year and the change in the value of the bond from the beginning to the end of the year.
A) true (correct)
B) false
Martin Manufacturers is considering a five-year investment which costs $100,000. The investment will produce cash flows of $25,000 each year for the first two years (t = 1 and t = 2), $50,000 a year for each of the remaining three years (t = 3, t = 4, and t = 5). The company has a cost of capital of 12 percent. What is the MIRR of the investment? (please show how to work out this problem )
ANSWER 19.45
Purchase this Solution
Solution Summary
You will find the answer to this puzzling assignment inside...
Solution Preview
Please see the attached Excel file for details.
------
the modified IRR (MIRR) method overcomes the problems of cash flow timing and project size that lead to criticism of the regular IRR method
A) true
B) false (correct)
This is because the MIRR does the following:
Overcomes the problem of multiple internal rates of return, and compounds cash flows at the cost of capital. What differentiates MIRR from IRR is the fact that MIRR assumes that cash inflows would be reinvested at the cost of capital.
A 10-year corporate bond has an annual coupon payment of 9 percent. The bond is ...
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
Recent Feedback
- "ty i have more need help with"
- "ty i have jmore i need help with"
- "great help"
- "excellent help"
- "Very helpful and easy to understand."
Purchase this Solution
Free BrainMass Quizzes
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Operations Management
This quiz tests a student's knowledge about Operations Management
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.