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# Interest Rates and the Cost of Debt

### Calculating Interest Rate

Find the interest rate implied by the following combinations of present and future values: Present Value - Years - Future Value \$400 - 11 - 684 \$183 - 4 - \$249 \$300 - 7 - \$300

### Financial Statements of Coca-Cola Company and PepsiCo

The Coke-Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Selected data from the 2004 consolidated financial statements for The Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions). CocaCola

### Compounded Interest - 5-year Certificate of Deposit

I'm stuck in figuring out the following problem. Tracey deposits \$5000 in a 5-year certificate of deposit paying 6% compounded interest semiannually. How much will Tracey have at the end of a 5-year period. I think that the appropriate formula would be FVn=PV(1+r/m)n*m

### General Mills Ratio Analysis

I need a ratio analysis on General Mills for 2007. Identify your General Mills strengths and weaknesses. Do you feel that this firm's financial ratios depict a strong or weak firm?

### Important information about Time to double

Compound Interest. New Savings Bank pays 4 percent interest on its deposits. If you deposit \$1,000 in the bank and leave it there, will it take more or less than 25 years for your money to double? You should be able to answer this without a calculator or interest rate tables.

### Interest rate risk.

Suppose interest rates increase from 8 to 9 percent. Which bond will suffer the greater percentage decline in price: a 30 - year bond paying annual coupons of 8 percent or a 30 year-zero-coupon? Can you explain intuitively why the zero exhibits greater interest rate risk even though it has the same maturity as the coupon bond

### Interest of Continuous Compounding

I have 5,000 dollars in my savings account. If I choose to keep my money for five years in a savings account with a 2% interest rate or in a five year certificate of deposit with and interest rate of 4.5%. Calculate how much interest you would earn with each option over five years time with continuous compounding.

### Multiple Choice Questions: cost of debt, cost of capital, leverage, dividend reinvestment plan, cost of the preferred stock, optimal mix of debt and equity financing

1.9 The before-tax cost of debt for a firm which has a 40 percent marginal tax rate is 12 percent. The after-tax cost of debt is: a. 4.8 percent b. 6.0 percent c. 7.2 percent d. 12 percent 1.10 The cost of capital reflects the cost of funds: a. over a short-run time period b. at a given point in time c. over a lo

### Give exact and approximate interest calculations

There are a number of different interest rate formulas find the "exact rate" and "approximate rate" for the following numbers a i=4%, Inflation=2% b. i=15%, inflation=11% c. i=54%,Inflation rate=46% The exact rate is :1The correct formula is 1 + r = (1 + i)/(1=P(e) ) where r i s the exact real interest rate, i is the ob

### Your bank pays a quoted annual (nominal) rate of 12%. However, it compounds interest every week (52 times a year). What is the effective annual rate (EAR)?

Your bank pays a quoted annual (nominal) rate of 12%. However, it compounds interest every week (52 times a year). What is the effective annual rate (EAR)?

### Simple Interest and Compound Interest

If Steve invests \$5,000 in an interest bearing security paying 10% per year for 5 years, what will his investment be worth: a. if the security pays simple interest? b. if the security pays interest compounded annually? c. How much simple interest is earned over the life of the investment? d. How much compound int

### Calculating the Expected Interest Rate

If the real risk-free rate is 3%, inflation is expected to be 2% this year and 4% during the next 2 years. Assuming the maturity risk premium is zero, what is the yield on 2-year Treasury Securities? what is the yield on 3-year Treasury Securities?

### Simple and compound interest transactions.

Hi please help with the following problems. Over a period of years, an investment in an account which pays 6 percent simple interest will: a. earn the same dollar amount of income as an account returning 7 percent simple interest. b. earn more income than an account paying 6 percent compound interest. c. increase in

### Bond Payment and Nominal Rate of Return

Assume that a 15-year, \$1,000 face value bond pays interest of \$37.50 every 3 months. If you require a nominal annual rate of return of 12 percent, with quarterly compounding, how much should you be willing to pay for this bond? (Hint: The PVIFA and PVIF for 3 percent,60 periods are 27.6748 and 0.1697, respectively.) a. \$ 821

### Compound Interest Investments

You need \$28,974 at the end of 10 years and your only investment option is an 8% long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning of the first year. A) What single payment could be made at the beginning of the first year to achieve

### Unknown Periods and Unknown Interest Rate

Consider the following independent situations. (a) Mike Finley wishes to become a millionaire. His money market fund has a balance of \$92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get his desired \$1,000,000? (b) Assume that Serena Williams desires to

### Why would a company pay to have its public debt rated by a major rating agency (such as Moody's or Standard and Poor's)?

Why would a company pay to have its public debt rated by a major rating agency (such as Moody's or Standard and Poor's)? Why might a firm decide not to have its debt rated?

### Comparative Analysis of Google and Yahoo

Hi, is there someone with a strong Fin. accounting background who has probably completed a report (financial analysis between Google and Yahoo) like this one-who can help me with this project? Thanks

### Unknown periods and unknown interest rates

E6-10 (Unknown Periods and Unknown Interest Rate) Consider the following independent situations. (a) Mike Finley wishes to become a millionaire. His money market fund has a balance of \$92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get his desired \$1,000,0

### Investment banking & potential conflicts of interes

Can I please have a short paragraph to answer the following question? Joe Klein is an analyst for an investment banking firm that offers both underwriting and brokerage services. Joe sends you a highly favorable report on a stock that his firm recently helped go public and for which it currently makes the market. What are t

### On January 1, 2007, the Kings Corporation

On January 1, 2007, the Kings Corporation issued 10% bonds with a face value of \$100,000. The bonds are sold for \$96,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 2011. Kings records straight-line amortization of the bond discount. The bond interest expense for the

### Corporate managers are expected to make corporate decisions that are in the best interest of

1. Corporate managers are expected to make corporate decisions that are in the best interest of A) top corporate management. B) the corporation's board of directors. C) the corporation's shareholders. D) all corporate employees. C Why? 2. Financial markets are used for trading: A) both real assets and fin

### Interest and the Time Value of Money

1. If you borrow \$4000 from an online lending company to buy a PC and agree to pay it in 48 equal installments at 0.9% interest per month on the unpaid balance, how much are your monthly payments? (ans= \$102.99) And how much total interest will be paid. (ans= \$943.52) 2. A business borrows \$80,000 at 9.42% interest com

### How much did each of them invest at different rates?

Jane invested some amount at the rate of 12% simple interest and some other amount at the rate of 10% simple interest. She recieves yearly interest of \$130.00. Randy also invested in the same scheme, but he interchanged the amounts invested and recieved \$4.00 more as interest. How much amount did each of the invest at different

### Compound Interest and Time Value of Money

I just need to know how to take this equation A=P(1+r/365)^n and solve it for r this is what I came up with ((A/P)^1/n-1)365=r which though was right but when I plugged the numbers from the next part of the question the answers were not coming out right can you tell me if my equation for r is correct. Here is the question:

### Coupon Interest Rate on Warrants

Shearson PLC's stock sells for \$42 per share. The company wants to sell some 20-year, annual interest, \$1,000 par value bonds. Each bond will have attached 75 warrants, each exercisable into one share of stock at an exercise price of \$47. Shearson's straight bonds yield 10 percent. The warrants will have a market value of \$2

### Interest Rate of Borrowing \$2,000,000

A firm needs to borrow \$2,000,000 for the next year to finance working capital. It¿s bank as proposed a combination of loan products as follows: 1) \$750,000 from a line of credit at 12%; \$600,000 at 9% collateralized by inventory; and 3) the remainder at 7% with a second mortgage on the factory building. If the firm accepts

### Present and Future Values for Different Interest Rates

Use equations and a financial calculator to find the following values. See the hint for problems 2-1 a. An initial 500 compounded for 10years at 6 percent b. An initial 500 compounded for 10 years at 12 percent c. The present value of \$500 due in 10 years at a 6 percent discount rate. d. The present value of \$1,552.90 due

### Marietta Corporation After Tax Cost

This is an undergraduate finance question. I have attached an Excel sheet with the complete problem from the book, my question is only about question 1, finding the after tax cost of only project A. Marietta Corporation

### Interest Problem - Suppose market interest rates are expected to rise.

Suppose market interest rates are expected to rise. Would a potential borrower find a fixed rate mortgage or a variable rate mortgage more attractive? Why?