Discuss the relationship between bond prices and interest rates. What impact do changing interest rates have on the price of long-term bonds versus short-term bonds?
Which is the best approach to common stock valuation and why?
1) For the Morton Inc Company, the average age of accounts receivable is 60 days, the average age of accounts payable is 45 days, and the average age of inventory is 72 days. Assuming a 365-day year, what is the length of the firms cash conversion cycle? a. 87 days b. 90 days c. 65 days d. 48 days e. 66
A fund wishes to sell (write) European calls on 2-year, 4.5% coupon Treasury notes. The notes currently sell for $98.90. The one-year forward rate (r0) is 4.65 percent. The assumed one-year forward rate one year from now (r1,L) is 5.0 percent. The standard deviation is 10 percent. Fill in the seven boxes of the following binomia
1 The following information relates to Jasper LLC: Bonds units - 1000 units of $1 each Bonds Amount - $1,000,000 Maturity - 5 years Market Rate - 8% Coupon Rate - 10% Interest payments - Twice yearly. QUESTION: 1. What is the price of the bond? 2 PFC Properties has the following information:
If the interest rate is 8%, what would you expect to pay for a discount bond paying $10.000 in 10 years?
Discuss the relationship between the coupon rate (original interest rate at time of issue) on a bond and its security provisions.
1) Franklin Corporation is planning to issue new 20-year bonds. Initially, the plan was to make the bond non-callable. If the bond were made callable after 5 years with a 5% call premium, how would this affect the bond's required rate of return? a. It is impossible to say without more information. b. Because of the
Jones Corp's EBITDA last year was $385,000 (= EBIT + depreciation + amortization), its interest charges were $10,000, it had to repay $25,000 of long term debt, and it had to make a payment of $20,000 under a long term lease. The firm had no amortization charges. What was the EBITDA coverage ratio? a. 7.36 b. 7.69
1. Which of the following are included in this year's GDP? Explain your answer in each case. a. Interest on an AT&T corporate bond. b. Social security payments received by a retired factory worker. c. The unpaid services of a family member in painting the family home. d. The income of a dentist. e.
Create a brief investment strategy. Set a monetary goal, it could be a million dollars or some other dollar amount. Make the investment plan by considering the income level, age, and potential career growth. Please use the following info: ? Annual income: 60K. ? Age: 35. ? Potential career growth: To own and operate severa
1) Using the Balance Sheet figures, calculate capital structure, working capital, current ratio, Acid-test ratio. 2) Using the Income Statement, calculate EPS, return on equity, preferred dividend rate, book value per share. 3) If you are in a 28% tax bracket, which of the following two investments you pick? 4) What is the tax-free yield equivalent of a taxable 9.2% corporate bond for an individual in a 25% tax bracket?
1.Using the Data in the Balance Sheet Attached, calculate the following: Balance Sheet ABC CORPORATION June 30, 1988 Assets Liabilities Cash $165,000 Accounts payable $166,000 Marketable securities 18,000 Accrued taxes 70,000 Accounts receivable 260,000 Notes payabl
A bond's perpetuities are 10 percent coupon, bonds of this type currently yield 8 percent and their par value is 1,000 - what is the price of the bonds. Please show me how to compute this without the use of a financial calculator. Also can you tell me how this would change if the bonds were not a perpetuities but instead had a
PV versus FV 4. If the "discount" (or interest) rate is positive, the present value of an expected series of payments will always exceed the future value of the same series. a. True b. False The discounting is the process of finding the PV of a future cash flow and is the reciprocal, or reverse of compounding. 5.
1. How much will you have after 6 years if you invest $15,000 at 8% per year compounded annually? Quarterly? 2. How much you need to invest now at 8% interest rate compounded semiannually in order to have $10,000 in 5 years from now? 3. Find the present value of $12,000 due four years from now if rate of interest is 6.0% p
You are the owner of 100 bonds issued by Euler, Ltd. These bonds have 8 years remaining to maturity, an annual coupon payment of $80, and a par value of $1,000. Unfortunately, Euler is on the brink of bankruptcy. The creditors, including yourself, have agreed to a postponement of the next 4 interest payments (otherwise, the ne
Problem 4 is cumulative voting problem 16 is preferred stock in arrears problem 7 is stock split and stock dividend problem 16 is dividends and stockholder wealth maximization problem 19-4 price of a convertible bond See attached file for full problem description.
If Wild Widgets, Inc., (WWI) were an all-equity firm, it would have a beta of 0.9. WWI has a target debt-to-equity ratio of 0.50. The expected return on the market portfolio is 16%, and Treasury bills currently yield 8% per annum. WWI one-year, $1,000 par value bonds carry a 7% annual coupon and are currently selling for $972
Please show how to calculate the answer for the attached problems. Consider a $1, 000 par value bond with a 7 percent annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10 percent? Beck Company,
I cannot find any help in the textbook for this problem. As I'm taking an online course, finding alternative forms of help proves difficult. Here's the problem: Explain how the price of a new security is determined.
O'Meara Inc plans to issue 6 million of perpetual bonds. The face value of each bond is $1,000. The semi-annual coupon on the bonds is 4.5%. Market interest rates on one-year bonds are 8%. With equal probability, the long-term market interest rate will be either 12% or 6% next year. Assume investors are risk-nuetral. a) IF
1. As of December 1999, Amazon.com had never paid a dividend and the market value of its stock was $37 billion. Does this invalidate the dividend discount model? Why or why not? 2. Which capital budgeting technique is consistent with maximizing shareholder wealth and why? 3. WACC is also referred to by 3 other names.
(See attached file for full problem description)
A firm has a capital structure with 40% debt, 50% equity, and 10% preferred stock. If the following information is given, calculate company's WACC. YTM on firm's bond is 7.2% Beta is 1.2; risk free rate 5%; market risk premium is 5% Preferred stock pays dividend of $8 and sells for $100
A semiannual 3-year bond with the coupon of 6.5% has a YTM of 8%. Determine what price an investor should be willing to pay for this bond. (Hint: since the bond is semiannual, pay close attention to coupon payments, periods, and interest rate to be used for discounting bond cashflows; If the bond is currently trading at $935.50,
1. Which is the best approach to common stock valuation and why? 2. Which capital budgeting technique is consistent with maximizing shareholder wealth and why? 3. What role does depreciation play in break-even analysis based on accounting flows? Based on cash flows? Which perspective is longer term in nature? 4.
Based on risk-return tradeoffs observable in the financial marketplace, which of the following securities would you expect to offer higher expected returns than corporate bonds? a. U.S. Government bonds b. municipal bonds c. common stock d. commercial paper e. none of the above
(See attached file for full problem description)
A) The balance sheet of the first chemical plant is given in the attached file. If annual sale is $400,000, profit before income tax is $200,000, and the corporate tax rate is 50%, compute the return-on-total-assets ratio and the inventory-turnover ratio. b) Define the inventory-turnover ratio and identify its two major inc
1. Should any government body; local, state, or federal, be involved in setting prices? Why or Why Not? Formulate your answer as if you were responding to this question by someone who is not familiar with economics. 2. Put yourself in the position of a wheat farmer in the United States. What type activity would you lik