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A 3-year treasury note has a face value of $1000 and annual coupon of 8%. The 1-year spot rate is r1 = 2%, and the 1-year forward rates for the next two years are r2 = 4% and r3 = 5%. (suppose coupons are distributed at the end of each year and rates are compounded discretely).
(a) Compute the price of the T-note.
(b) Calculate the YTM of the T-note.
(c) Calculate the 2- and 3-year spot interest rates.
Fine Press is considering replacing the existing press with a more efficient press. The new press costs $55,000 and requires $5000 in installation costs. The old press was purchased 2 years ago for an installed cost of $35,000 and can be sold for $20..
Suppose a firm finds itself as the target of a possible hostile takeover. An outsider investor has acquired a major stake of shares and is threatening to exert influence on the board.
What is the value of a perpetuity that pays $100 every 6 months forever? The discount rate quoted on an APR basis is 6.5%.
1. explain in your own words when and how the composition of capital the mix of debt and equity does not affect the
A surgical supply company sells on terms on 3/10, net 30. That means customers that pay in 10 days get a 3% discount, while customers that do not take the discount must pay in 30 days. What is the firm's average collection period? What is the firm's ..
In terms of things going in your favor for an organization, are there any specific financial tools, measurements, financial results that can be observed in order to evaluate whether or not a company is becoming too overextended in the area of leverag..
Epley Industries stock has a beta of 1.30. The company just paid a dividend of $.30, and the dividends are expected to grow at 4 percent. The expected return on the market is 13 percent, and Treasury bills are yielding 5.1 percent. The most recent st..
A machine costs $73,000 initially and will have a salvage value of $10,000 after 9 years. It will also have an operating cost of $21,000 in year 1, with 5% continuing increases each year thereafter to year 9. The MARR is 19% per year. Compute the Equ..
Common stock mutual fund manager, Mr. Jim, forms expectations about the cyclical phase of the stock market when actively managing his fund portfolio. In what situation might Mr. Jim want to lower the average beta of the fund that he manages? Explain ..
Compounding frequency and time value: You plan to invest $2,000 in an individual retirement arrangement (IRA) today at a nominal annual rate of 8%, which is expected to apply to all future years.
Consider the following annualized spot rates: Maturity Annualized Spot Rates. Based on this information calculate the implied six-month forward rate one-and-a-half years from now.
If a nurse deposits $1,000 today in a bank account and the interest is compounded annually for 12 percent, what will be the value of this investment: Five years from now
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