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Bonds

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 .

Bonds: Implied Rates

At your favorite bond store, Bonds R Us, you see the following prices: One year $100 zero selling for $90.19 Three year 10% coupon $1000 par bond sell for $1000 Two year 10% coupon $1000 par bond selling for $1000. Assume that the expectations theory for the term structure of interest rates holds, no liquidity premiu

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

Right to repurchase a debt issue

Corporations typically have the right to repurchase a debt issue prior to maturity at a fixed price, but only after some number of years have passed. Such debt is said to feature: a. a sinking fund. b. a balloon payment. c. a redeemable-at-par provision. d. a deferred call.

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

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

Market interest rate, rd

The market interest rate, rd, for a given bond increased, then the price of the bond would decline. Applying this same logic to stocks, explain (a) how a decrease in risk aversion would affect stocks' prices and earned rates of return, (b) how this would affect risk premiums as measured by the historical difference between retur

Convertible bond and rates of return

Laser Electronics Co. has $30 million in 8% convertible bonds outstanding. Conversion rate is 50; the stock price is $17; and the bond matures in 15 years. The bonds are currently selling at a conversion premium of $60 over their conversion value. If the price of the common stockrises to $23 on this date next yesr, what would

Present value of a bond

Write the equation which expresses the present value (or price) of a bond that has an 8% coupon (annual payments), a 4-year maturity, and a principal of $1,000, if yields on similar securities are 10%

Interest payments to the US Debt

What does the interest paid each year on the US debt mean? Compare this feature to that of a household and a hypothetical household's debt load?

Price a bond should sell at

A bond recently issued matures in 15yrs. They have a par value of $1000 and an annual coupon of 6%. If the current market interest rate is 8% at what price should the bonds sell? I have tried using Excel and the numbers don't make sense when I put them into the formula.