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You have some money that you would like to invest. One investment that you are considering is an 8.5% coupon bond that makes quarterly payments and matures in 8 years. It has face value of $1000. Another is an annuity that makes quarterly payments for 8 years. You notice in the Wall Street Journal that you could also purchase a zero coupond bond for $834.40 with a par value of $1000 that mature in 8 years. Assume a flat rate term structure of interest rates ( that is that all the YTMs from years 1 to 8 are the same).
A. What is the coupon bond price?
B. What quarterly annuity payment is required to make you indifferent between investing in the coupon bond and the annuity?
Osbourne Corporation has bonds on the market with 16.5 years to maturity, a YTM of 10.6 percent, and a current price of $942. The bonds make semi-annual payments. What must the coupon rate be on the bonds?
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Mess man Manufacturing will issue common stock to the public for $40. The expected dividend and growth in dividends are $3.50 per share and 3%, respectively. If the flotation cost is 9% of the issue's gross proceeds, what is the cost of external equi..
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If the current exchange rate is $1.25/£, the one-year forward exchange rate is $1.40/£, and the interest rate on British government bills is 10.50% per year, what risk-free dollar denominated return can be locked in by investing in the British bills?..
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Messman Manufacturing will issue common stock to the public for $40. The expected dividend and growth in dividends are $3.50 per share and 3%, respectively. If the flotation cost is 9% of the issue's gross proceeds, what is the cost of external equit..
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