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A) Intrinsic value of a bond means fair value or economic value of a bond. For instance, two bonds are of a same risk and same coupon rate of 10 percent, required rate of return of 12 percent and same par value of $1000 but only differs in term of maturity period. If due to any reason the required rate of return increases, which bond will show the greatest price change? and Why? Support your answer with calculations.
B) The stock of a company is just sold for $60/share and the dividends just paid are $5/ share. If the dividends are expected to grow at a 10 percent interest rate for first three years and 8 percent thereafter. If the required of rate return is 12 percent, then
i. What is the intrinsic value of this stock? Further, identify stock is undervalued or overvalued.
ii. If the investor seeks your opinion in making investment in this stock. What would be your answer?
May personal financial statements be prepared only for an individual? Comment.- What is the basic personal financial statement?
A project has an initial outlay of $4,949. It has a single payoff at the end of year 3 of $8,124. What is the profitability index (PI) of the project.
What do you think happened to the futures price over the month of November? Why? If you had known that this would occur, would you have purchased or sold a December futures contract in pounds on November 1? Explain.
One method used to obtain an estimate of the term structure of interest rates is called bootstrapping. Suppose you have a one-year zero coupon bond with a rate of r1 and a two-year bond with an annual coupon payment of C
Assuming a change in interest rates over time, explain the two risks faced by the holder of a bond - The ability to immunize a bond portfolio is very desirable for bond portfolio managers in some instances.
Imagine that you buy a house as a rental property. The cost of buying the house was $350,000, of which $75,000 is the value of the land. Approximately how much can be used as a federal income tax deduction per year for depreciation?
Gresham's required return (rs) is 12.00%. What is company's current stock price?
Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data.
Why do such conflicts develop? Provide at least two examples of agency problems. Are such conflicts more likely to occur in smaller or larger organizations?
This person forgoes consumption and instead places $230 into a tax sheltered retirement plan every month. What are the yearly tax savings due to these retiremen
What is meant by a viable venture opportunity?
The structure of an organization can affect the entire success of the project from initiation to closure. Identify if your organization is centralized or decentralized and evaluate benefits and weaknesses of structure.
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