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1. Repeat the previous problem, only compute the expected recovery value instead of the default probability. How does the expected recovery value change as time to maturity changes?
2. Suppose that there is a 3% per year chance that the firm's asset value can jump to zero. Assume that the firm issues 5-year zero-coupon debt with a promised payment of $110. Using the Merton jump model, compute the debt price and yield, and compare to the results you obtain when the jump probability is zero.
buy coastal inc. imposes a payback cutoff of three years for its international investment projects.yearcash flow acash
B&O Railroad's convertible debentures were issued at the $1000 par value in 2002. At any time prior to their maturity on Feb. 1, 2022, a debenture holder can exchange a bond for 25 shares of common stock. What is the conversion price. Must show wo..
Evaluate open end and closed end funds. Which fund would you recommend?
Banco Herrero wants to make a bid-ask spread of 0.55 percent on its foreign exchange transactions. If the ask rate on the Mexican peso (MP) is MP10.4192/$, what does the bid rate have to be? (Do not round your intermediate calculation. Round your ..
Suppose Provo, Inc., had net income of $30 million for the most recent fiscal period. If its depreciation and amortization for the period is $3 million and its cash flow from operations is $35 million, what is its change in working capital for thi..
The expiration date of the options are six months from now. The risk free interest rate is 5% per annum. What is the fair price for this portfoilio. Why?
Bond Issue Bob is managing a bond issue for the company. You receive an urgent voice mail from him.
in january 2002 six-month 182-day treasury bills were issued at a discount of 1.75 percent. what is the annual
A firm just paid a dividend of $1.50 and the growth rate of dividends is constant at 3%. The firm's shares are trading at $32.50 each. In computing WACC, the firm's cost of equity is?
assume you have just been hired as a business manager of pizzapalace a regional pizza restaurant chain. the companys
the goodman industries and landry incorporateds stock prices and dividends along with the market index are shown below.
Impact of Credit Crisis on Risk Premiums: - Explain how the credit crisis affected the credit risk premium in the commercial paper market.
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