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Bonds

Total Rate of Return elements

American Fortunes is preparing a bond offering with an 8% coupon rate. The bonds will be repaid in 10 years. The company plans to issue the bonds at par value and pay interest semiannually. Given this, which of the following statements are correct? (I.) The initial selling price of each bond will be $1,000. (II.) After the b

Bonds & Growth Rates

The "teacher" in this course thinks that by reading a module, that somehow I'll understand the logic to these questions. I have some of the formulas figured out, but I'm lost as to why I'm not getting the any of the options as answers. ABC Co. pays out 60% of its earnings as dividends. Its return on equity is 15%. What is th

Net Present Value of This Investment

Two bonds of equal risk are for sale on the secondary bond market. The two bonds have the same face value, and both mature in 10 years. Bond A pays $10 per year and bond B pay $15 per year. Which bond will sell for a higher price? a. Bond A. b. Bond B. c. They will sell for the same price. d. The relative prices will dep

Calculate the cost of equity for Dell Corp.

Assume a world without taxes. Two firms, Max Corp. and Dell Corp. are identical in every way except for their capital structures. Max, an all-equity firm has 200,000 shares of common stock outstanding; each share sells for $30. The cost of equity for Max is 12%. In addition to equity financing, Dell uses leverages; it has 3,000

Multiple Finance Questions

Please see attached questions. Please explain how you got the answers that you provide. 1. The future value of an annuity due is greater than the future value of an otherwise identical ordinary annuity. a . True b. False 2. If we invest money for 10 years at 8 percent interest, compounded semi-annually, we are re

Bond Valuation

As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in 8 years, and have a coupon rate of 7.5% on a face value of $1000. Currently, the bonds are selling for $900. a. If your required return is 9% for bonds in this risk class, what

Polly Graham will receive $12,000 a year for the next 15 years as a result of her patent. If a 9 percent rate is applied, should she be willing to sell out her future rights now for $100,000?

I need to discuss the answers in class. Just wanted to double check my answers to be sure. 1. Polly Graham will receive $12,000 a year for the next 15 years as a result of her patent. If a 9 percent rate is applied, should she be willing to sell out her future rights now for $100,000? 2. The Clearinghouse Sweepstakes has j

The Balance sheet for Sam Corporation

1. The Balance sheet for Sam Corporation is shown below. Sales for the year were $3,040,000, with 75% of sales sold on credit.3-19 Sam Corporation Balance Sheet 2007 Assets Liabilities and Stockholders Equity Cash.......................$ 50,000 Accounts payable................$ 220,000 Accounts rece

Bonds/rate of return

The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest semi-annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return on bonds is 10%, what is the current price of: a) the bonds w

Bonds and Sinking funds

Question 6 (Bonds) (12 marks) A company decides to issue 10,000 bonds with a 10-year maturity and a 6% coupon rate. The bond has a face value of $1,000 and pays semi-annual coupons. The market requires an effective yield to maturity on a bond with similar risk of 7%. (a) What is the fair price of the bond? (6 marks) In or

Interest Rate and Pricing

Please see the attached file. Question 5 (Bonds) You purchased a 10-year bond on the basis of a current yield of 6.5%. The face value of the bond at maturity is $1,000 and the coupon rate is 6% (APR) payable semi-annually. (a) What are the purchase price of the bond and its YTM? (b) The day after you bought the bond, in

Financial Managment

Please see the attached file. Understanding Returns 6-1 You purchase 1,000 shares of Spears Grinders, Inc. stock for $45 per share. A year later, the stock pays a dividend of $1.25 per share, and it sells for $49. a. Calculate your total dollar return. b. Calculate your total percentage return. c. Do the answers to p

Financial Management

Please see the attached file. Valuation Basics 1. A best selling author decides to cash in on her latest novel by selling the rights to the book's royalties for the next four years to an investor. Royalty payments arrive once per year, starting one year from now. In the first year, the author expects $400,000 in royalties

Bond Valuation

Consider the two bonds described below Bond A Bond B Maturity(years) 15 20 Coupon rate(0%) 10 6 Paid semiannually Par Value $1,000 $1,000 a. If both bonds had a req

Bond Valuation

A $1,000 par value bond sells for $1,216. It matures in 20 years, has a 14 percent coupon, pays interest semiannually, and can be called in 5 years at a price of $1,100. What is the bond's YTM and YTC? YTM YTC a. 6.05%; 9.00% b. 10.00%; 10.26% c. 10.06%; 12.00% d. 11.26%; 14.00% e. 11.26%; 10.00%

Bond Valuation

The Stuart Corporation has excess cash to invest in one of two securities. The company's tax rate is 40 percent. The first alternative is a 10-year, 10 percent coupon bond (with semiannual interest payments) that has a current price of $1,000 and a yield of 10 percent. The second alternative is the preferred stock of Pickett

CAPM and Cost of Equity

If I have a company whose beta is .54,the present yield to maturity on U.S. government bonds maturing in one year (currently about 4.5% annually) and an assessment that the market risk premium is 6.5%, using the CAPM equation,what is the present cost of equity of my company? If I have 2 companies, A and B, the beta of A is .

Current Price of bonds

Consider a bond with a 7% annual coupon and a face value of $1000. Complete the following table Year to Maturity Yield to Maturity Current Price 3 5 ? 3 7 ? 6

Sam McKenzie is the founder and CEO of McKenzie Restaurants, Inc., a regional company. Sam is considering opening several new restaurants. Sally Thorton, the company's CFO, has been put in charge of the capital budgeting analysis. She has examined the potential for the company's expansion and determined that the success of the new restaurants will depend critically on the state of the economy next year and over the next few years.

Sam McKenzie is the founder and CEO of McKenzie Restaurants, Inc., a regional company. Sam is considering opening several new restaurants. Sally Thorton, the company's CFO, has been put in charge of the capital budgeting analysis. She has examined the potential for the company's expansion and determined that the success of the

What is the maximum price you should be willing to pay for the bond?

Assume that you are considering the purchase of a 15-year bond with an annual coupon rate of 9.5%. The bond has face value of $1,000 and makes semiannual interest payments. If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

Balance Sheet

Please see the attached file. I need to really understand this balance sheet because I'm going to take a text. Can you please explain to me more clearly how the additional information was used to create the Balance Sheet? Are 8 additional points, can you use different colors for each explanation point

Calculating total real return on the investment in bonds.

Calculating Investment Return You bought one of Bergen Manufacturing Co.'s 8% coupon bonds one year ago for $1,028.50. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7%. If the inflation rate was 4.8% over the past year, what

Determine market price and yield

The US government issues a 1-year bond with a face value of $1,000 and a zero coupon. The market interest rate is 10 percent, what is the market price of the bond? If that bond price falls by 5 percent, what happens to its yield?

Currencies: Real interest rate, effective return on investment Fisher equation, interest rate parity, relative PPP , real interest rate, nominal interest rate, Canadian dollar spot rate, Japanese yen spot rate, forward

1.) Suppose the nominal interest rate in the US is 7.5% and US inflation is 3.5%. Also the Canadian dollar spot rate is 0.8574 and the Japanese yen spot rate is 0.00688. Finally, the 90-day forward rate for the Canadian dollar is 0.8493 and for the Japanese yen is 0.00700. If we assume the Fisher equation, interest rate parity,

Define benefit and cost externalities.

2. Define benefit and cost externalities. Explain why situations involving benefit externalities tend to result in an underallocation of society's scarce resources, and why situations involving cost externalities tend to result in an overallocation of society's scarce resources. 12. The Learned Book Company has a choice of p