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Consider a 10 year bond making annual coupon payments at a rate of 8% with a face value of $1000. The market interest rate is 8%.
a) Suppose you decide to buy the bond today and hold it for 10 years. What is the price of the bond and your (holding period) return (in percentages) if the term structure stays flat at 8% for the entire 10 years during which you hold the bond?
b) Suppose you decide to sell the bond at the end of year 5. If the interest rate stays at 8% for the next two years from now (time 0) and then shifts down to 5% and stays at 5% for the remainder of the 10 years, what price can you sell the bond at the time of transaction and what is your (holding period) return (in percentages)?
These are the forecasts of revenues over the lifetime of a project. Assume all cash flows occur at the end of the year. This hint is optional; you don't have to read this. This is only to help you, if you are confused by this hint just ignore it and ..
A company has total assets of $120,000, current assets of $80,000, total liabilities of $50,000, and current liabilities of $25,000. What is the current ratio?
You buy a car today for $29,000. If you finance it with a 6% APR, 4 year loan, what is the difference in your payments if you agree to pay at the beginning of each month rather than at the end? Assume monthly compounding.
An investor purchases a 30-year U.S. government bond for $840. The bonds coupon rate is 10 percent and, it still had twelve years remaining until maturity. If the investor holds the bond until it matures and collects the $1000 par value from the Trea..
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The Treasury department issued a 10-year bond on January 1, 2015. The par value is $1,000 and the annual coupon rate is 10%. The bond pays two coupons every year, one at the end of June and one at the end of December. The required annual yield is 8%...
The internal rate of return is the most reliable method of analysis for any type of investment decision. The payback method is biased towards short-term projects. The modified internal rate of return is most useful when projects are mutually exclusiv..
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Buddy owns 100 of the outstanding shares of Binder Corporation stock. Buddy's basis in his Binder Corporation stock is $100,000. Binder Corporation is merged with Clipper Corporation in a tax-free reorganization. Buddy and Bruce each own 25% of Clip..
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