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
If the interest rate is 8%, what would you expect to pay for a discount bond paying $10.000 in 10 years?
A previously issued A2, 15-yr industrial bond provides a return 1/4th higher than the prime interest rate of 8%. Previously issued A2 public utility bonds provide a yield of 3/8ths of a percentage point higher than previously issued A2 industrial bonds of equal quality. Finally, new issues of A2 public utility bonds pay 1/4th
Florida Investment Fund buys 90 bonds of the Gator Corp through a broker. The bonds pay 8% annual interest. The yield to maturity is 10%. The bonds have a 25-year maturity. Using the assumption of semiannual interest payments: a. compute the price of a bond b. compute the total value of the 90 bonds.
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 sever
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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 m
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,
Here's the problem: PG Corp has a bond outstanding with a par value of $1,000, an annual interest payment of $110, a market price of $1,200, and a maturity in 10 years. Determine the following: a. Coupon rate b. Current yield c. Approximate yield to maturity.
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
7. You have an opportunity to buy a $1,000 bond that matures in 10 years. The bond pays 6% annual interest, and interest is payable every six months. The current market interest rate for similar bonds is 8%. What is the most you would be willing to pay for this bond? 8. Mr. Sullivan is borrowing $2,000,000 to expand his busin
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.
Your uncle has given you three alternatives for your inheritance. You can have $5,000 now; $1,000 per year for the next eight years; or $12,000 at the end of eight years. You assume your opportunity cost or discount rate is 11% interest annually. 1. Which inheritance alternative would be best? Why? 2. Would your decis
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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,