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Bonds

Gross Domestic Product is investigated.

What is nominal GDP? What is real GDP? What is included in each? Why are these measures important? What do they tell us? What was GDP for the last two years (taken from the BEA)?

Capital Budgeting

Joe the cut-rate bond dealer has offered to sell you a ten year zero-coupon bond for $300. (Remember, zero-coupon bonds pay their owners $1,000 at maturity and involve no other cash flows other than the purchase price.) If your required rate of return for cut-rate bonds is 20%, what is the NPV of Joe's deal? a. about $161

Market Substitutes and Term Structure (Yield Curve)

1. The IPAD 2 replaced the IPAD 1 and we can assume they are substitutes. RIM recently introduced the PLAYBOOK and we can assume it is also a substitute for both IPADs. a) Explain what will happen to the equilibrium prices and quantities of the IPAD 2 and the PLAYBOOK if the price of touch screens rises as a result of the dev

Corporate Finance

1) Future value tables Use the future value interest factors in Appendix Table A 1 in each of the cases shown in the following table to estimate, to the nearest year, how long it would take an initial deposit, assuming no withdrawals, a. To double. b. To quadruple. Case Interest rate A 7% B 40 C 20 D 10 2) Time value As pa

Corporate Finance

1) Bond prices and yields Assume that the Financial Management Corporations $ 1,000- par- value bond had a 5.700% coupon, matured on May 15, 2017, had a current price quote of 97.708, and had a yield to maturity ( YTM) of 6.034%. Given this information, answer the following questions. a. What was the dollar price of the bond? b.

Finance: Net present value

A risky project is expected to last four years and required an initial investment of $10,000 in year 0. The project is expected to generate cash flows of $2,000 in year 1; $4,000 in year 2; $3,000 in year 3; and $3,000 in year 4. The company's debt to equity ratio is equal to 1, and is expected to remain constant for the entir

Bond valuation and relationships are exemplified.

1. Assumed that the Financial Management Corporation's $1,000 par-value bond had a 5.700% coupon, matured on May 15, 2020, had a current price quote of 97.708, and had a yield to maturity of 6.034%. Given this information, answer the following questions: A. What was the dollar price of the bond? B. What is the bonds curren

Math conversions & graphs

3. Assume that the following data describe the condition of the banking system (see data in attached file) (a) How large is the money supply? (b) How large are the required reserves? (c) How large are the excess reserves? (d) By how much could the banks increase their lending activty? 6. Assume the banking system c

Calculate the company's current debt ratio.

1- Pierre Imports recently issued two types of bonds. The first issue consisted of 10-year straight debt with a 10 percent annual coupon. The second issue consisted of 10-year bonds with a 9 percent annual coupon and attached warrants. Both issues sold at their $1,000 par values. The company's stock is currently selling fo

Capital Risk Management

Pleasant View Nursing Home has decided to immunize its portfolio against interest rate and reinvestment rate risk by buying a bond that has a duration equal to the years until the funds will be needed (approximately ten years from today). The home is considering a 20-year, 9 percent annual coupon bond bought at its par value of

Six months T-bills have a nominal rate of 7%, while default free. Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market 1 yen equals $0.009. If interest rate parity holds, what is the 5-month forward exchange rate? 2. A TV set costs $500 in the United States. The same costs 550 Euros in france. If purchasing power parity holds, What is the spot exchange rate between the euro and the Dollar?-

1- Six months T-bills have a nominal rate of 7%, while default free. Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market 1 yen equals $0.009. If interest rate parity holds, what is the 5-month forward exchange rate? 2. A TV set costs $500 in the United States. The same costs 550

Expected Return, APT Model, Debt-Equity

1) Suppose that the Treasury bill rate were 6% rather than 4%. Assume that the expected return on the market stays at 10%. Use the betas in Table 8.2 . a. Calculate the expected return from Dell. b. Find the highest expected return that is offered by one of these stocks. c. Find the lowest expected return that is offered by one

Money Demand and the Equilibrium Interest Rate

Illustrate the following situations using supply and demand curves for money: a) The Fed buys bonds in the open market during a recession. b) During a period of rapid inflation, the Fed increases the reserve requirement. c) During a period of no growth in GDP and zero inflation, the Fed lowers the discount rate.

Federal Reserve

What does the Federal Reserve take into account when establishing general and specific rates of interest? Describe the recent tools the Federal Reserve has used to influence the U.S. economy, and explain their effects. In your opinion, have these measures been effective or ineffective in addressing the major concern or concerns

Bond value is assessed.

1. Find the value of a bond with the following characteristics: (a) face value of $1,000, (b) 8% coupon rate, (c) the bond matures in 14 years, (d) the market rate of interest is 6%. 2. Is the bond priced in question 1 selling at a discount or premium to its par value? 3. Using the information from question 1: the market r

weighted average cost of capital

Â?¢ The Firm has the following capital structure: (a) $100,000 in Debt, (b) $200,000 in Equity, and $50,000 in Preferred Stock. â?¢ Financial analysts have gathered the following information about the firmâ??s common stock: (a) the dividend that was just paid was $2.00, (b) the return on the market is estimated to be 10%,

Bond Cash Flows

Please help with the following finance problem regarding bond cash flows using step by step calculations. Bond Cash Flows: RRR issued 250,000 bonds at $1,000 par value that will mature in 25 years and will pay a coupon interest rate of 6% every year. Indicate the total cash flows for the corporation and the bondholder for t

Open market operations

1. What are open-market operations? How are they conducted to fight inflation and recession? Write your answers completely. 2. Why does the U.S. dollar fluctuate with other currencies? Explain thoroughly this with regard to: (a) Interest rates (b) Trade deficits

Behavioral Finance E

Read the following statements in italic and answer the two questions that follow. â??On the one hand, sound traditional valuation models like the DCF method require well-functioning capital and products markets. On the other hand, it is no secret that the recent financial and economic crises have caused the collapse or near

Business Finance for the Multinational Corporation

Having previously identified the location of its Greenfield investment, Acme, a multi-billion public MNE that is incorporated in the U.S., must next obtain external financing for its proposed overseas production facility. It has been estimated that the acquisition will cost $500M and all funds will be secured in the U.S. Your jo

Stocks, bonds and annuitites

Please see the attachment. In exchange for a $20,000 payment today, a well known company will allow you to chose one of the alternatives showing in the following table. Your opportunity cost is 11% Alternative Single Amount A $28,500 at end of 3 years B $54,000 at end of 9 years C $160,000 at end of 20 years A.

Bond Payment

Zumwalt Corporation's Class S bonds have a 12-year maturity, $1,000 par value, and a 5.75% coupon paid semiannually (2.875% each 6 months), and those bonds sell at their par value. Zumwalt's Class A bonds have the same risk, maturity, and par value, but the A bonds pay a 5.75% annual coupon. Neither bond is callable. At what pri

Virtual Assist.com's Cost of Capital

Please see attachment. The founders were relatively wealthy, mid-30s individuals when they started the company, and had enough confidence in their concept to commit most of their own funds to the new venture. Still, the capital requirements brought on by extremely rapid growth soon exhausted their personal funds. They were forc

The solution to weighted-average cost of capital

A firm's current balance sheet is as follows: Assets $100 Debt $10 Ã? Ã? Equity $90 a. What is the firm's weighted-average cost of capital at various combinations of debt and equity, given the following information? Debt/ After-Tax Cost of Equity Cost of Assets

5 short finance questions

Please look at attached document. 10-1 AFTER-TAX COST OF DEBT The Heuser Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Heuser's after-tax cost of debt?

Finance

Please see the attachment. 7-3 The values of outstanding bonds change whenever the going rate of interest changes. In general, short-term interest rates are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is that stateme