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A 30-year maturity bond has a 8% coupon rate, paid annually. It sells today for $917.42. A 20-year maturity bond has a 7.5% coupon rate, also paid annually. It sells today for $929.5. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 9% and that 15-year maturity bonds will sell at yields of 8.5%. Because the yield curve is upward-sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7%. a. Calculate the annual return for the 30-year maturity bond over the next five years. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected rate of return % b. What is the expected return of the 20-year bond. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected rate of return
Suppose the Simmons Co's common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2 percent. The yield to maturity in the firm’s bonds is 7.6 percent and the debt-equity ratio is .45. What is the cost of eq..
Rustico’s Restaurant is thinking of purchasing a wood-fired pizza oven to increase options at the restaurant beyond the freshly made pasta offerings.
Calculate the present value of cash inflows associated with each project. - Select the optimal group of projects, keeping in mind that unused funds are costly.
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made at the beginning of 2016 are as follows: ($ millions) 2017 2018 2019 2020 2021 Net income 1.0 2.0 3.2 3.7 4.0 Investment 1.0 1.0 1.2 1...
On September 1, Jennings, a used-car dealer, wrote a letter to Wheeler, stating, “I have a 1955 Thunderbird convertible in mint condition that I will sell you for $13,500 at any time before October 9. On September 29, Wheeler accepted Jennings’s offe..
Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9% (annual rate) coupon bond selling at par. What is the total return for this bond? Assume semiannual coupon payments
using the straight line and the MACRS depreciation methods Which depreciation method is best for year two?
What were the cost and selling price per unit of Job #462? What was the cost per unit of the raw material?
Stock Valuation at Ragan, Inc. Ragan, Inc., was founded nine years ago by brother and sister Carrington and Genevieve Ragan. The company manufactures and installs commercial heating, ventilation, and cooling (HVAC) units. Assuming the company continu..
Describe what is meant by a firm's financial failure.- According to the Beaver study, which ratios should be watched most closely, in order of their predictive power?
If you are importing a good valued $1000 from Japan with an exchange rate of $1=Yen 100, you agreed to pay 100,000 Yen in 90 days. But if Yen is stronger, say, $1=Yen 90, the total Yen you will pay is Yen 100,000/90 Yen/$) = $1,111 that means additio..
You are looking to buy a car. You can afford $560 in monthly payments for five years. In addition to the loan, you can make a $660 down payment. If interest rates are 10.25 percent APR, what price of car can you afford?
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