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A company has issues one- and two- year bonds providing 8% coupons, payable annually. The yields on the bonds (expressed with continuous compounding) are 6% and 6.6%, respectively. Risk-free rats are 4.5% for all maturities. The recovery rate is 35%. Defaults can take place halfway through each year. Estimate the risk-neutral default rate each year.
Five years ago you borrowed 200,000 to finance the purchase of a 240,000 home. The interest rate on this (old) mortgage is 10% MEY, and the level payments were made monthly to amortize the loan over 30 years (you did not curtail the loan in any way, ..
Consider a firm with a contract to sell an asset for $165,000 four years from now. The asset costs $94,000 to produce today. Given a relevant discount rate on this asset of 13 percent per year, will the firm make a profit on this asset?
Which is the largest expense for each company in the most recent year? What is its dollar amount? Is it logical that this would be the largest expense given the nature of each company's business? Explain your answer.
Counts accounting has a beta of 1.25. The tax rate is 35%, and Counts is financed with 45% debt. What is Counts' unlevered beta?
A preferred stock pays an annual dividend of $2.60. What is one share of this stock worth today if the rate of return is 11.75%
For the first part of this plan, we need to calculate the rate of return of our retirement savings will earn until we reach our retirement age (67 years old)
An endowment own $150M of bonds that has a modified duration (MD) of 8.5. Over the next 6 months they want to decrease the MD to 6.0. They can use Treasury futures contracts that mature in 6 months that have a current nominal value of $0.25M and have..
Calculate the cost of capital for Rio Tinto and state two reasons for why it may have declined since the GFC. Justify your answers using theory, calculations and research into current events.
What is the usual pattern of cash flows for a share of preferred stock? How does the market determine the value of a share of preferred stock, given these promised cash flows?
You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $2.75 a share at the end of the year (D1 = $2.75) has a beta of 0.9. The risk-free rate is 5.9%, and the market risk premium is 5.5%. Keller currently se..
Financial Analysts, Inc., is an investment firm that manages stock portfolios for a number of clients. A new client has requested that the firm handle an $800,000 portfolio. As an initial investment strategy, the client would like to restrict the por..
The financial statements of The Equipment Outlet reflect depreciation expenses of $41,800 and interest expenses of $35,200 for the year. The current assets increased by $19,700 and the net fixed assets increased by $34,900. What is the amount of the ..
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