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A $1000 par value bond with 5 years to maturity and a 6% coupon has a yield to maturity of 8%. Interest is paid semiannually.
Calculate the current price of the bond.
Calculate the Macaulay duration for the bond. Please interpret your answer.
Calculate the modified duration for the bond.
Estimate the percentage price change for this 5-year $1,000 par value bond, with a 6% coupon, if the yield rises from 8% to 8.5%. Interest is paid semiannually.
Calculate the convexity measure.
Three eye-ear-nose-and-throat physicians decide to hire an experienced audiologist in order to add a new service line to their practice. They ask the practice manager to prepare a three-level volume forecast as a first step in their decision-making.
A 10-year bond of a firm in severe financial distress has a coupon rate of 14% and sells for $900. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the..
Janet Boyle intends to deposit $ 340 per year in a credit union for the next 7 years, and the credit union pays an annual interest rate of 7%. Determine the future value that Janet will have at the end of 7 years, given that end-of-period deposits ar..
You are considering buying a bond issued by General Motors with exactly 5.5 years remaining to maturity that just paid a coupon yesterday. It rained on your paper this morning so you do not know what the coupon rate is. However you are able to see th..
Describe elements which can commonly cause uncertainty in the cash budget for an enterprose and the rationale for each. If you are the CFO of a company what techniques would you use to cope with this uncertainty? How might this change in a very large..
LKD Co. has 14 percent coupon bonds with a YTM of 9.8 percent. The current yield on these bonds is 10.3 percent. How many years do these bonds have left until they mature? JPix management is considering a stock split. JPix currently sells for $135 pe..
Fresno Corp. is a fast-growing company that expects to grow at a rate of 25 percent over the next two years and then to slow to a growth rate of 17 percent for the following three years. If the last dividend paid by the company was $2.15. What is the..
You have two portfolios for your clients to choose from or combine. One is an actively managed portfolio with an expected return of 18% and standard deviation of 28%. The other is a passive, index portfolio with an expected return of 13% and standard..
Your investment portfolio consists of ?$12,000 invested in only one stocklong dash Microsoft. Suppose the? risk-free rate is 5 %?, Microsoft stock has an expected return of 10 % and a volatility of 45 % and the market portfolio has an expected return..
Your cost of capital is 30% per annum. - Use the IRR rule to determine whether you should take this project. Does the NPV rule recommend the same action?
Juan, married and a father of 4 is 45 and expects to work until 65. he earns 70,000$ a year and expects an increase annually of 5%. Juan expects inflation to be 4% over his working life. His personal consumption is earl to 10% after tax earning and h..
Sisters Corp expects to earn $6 per share next year. The firm’s ROE is 15% and its plowback ratio is 60%. If the firm’s market capitalization rate is 10%. Calculate the price with the constant dividend growth model. What is the present value of its g..
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