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1. What amount comes closest to the present value of an annuity of 10 consecutive annual payments of $10 that begin at the end of the first year with one exception: there is no payment at the end of year 5 (and only in that particular year)? Use an interest rate of 4%
a. $72.89 b. 69.38, c. $66.13, d. $63.11, e. $69.96
2. Holding all else equal, the premium of a call option on common stock will increase if:
I. The price of the underlying goes up
II. The volatility of the underlying goes up
III. The time to expiration gets shorter
a. Only I is true b. Only II is true c. Only III is true d. Only I and II are true e. I, II, and III are true
A $1000 bond with a coupon rate of 6.2% paid semi annually has five year to maturity and a yield to maturity of 7.5%. If interest rates rise and yield to maturity increases to 7.8%, what will happen to the price of the bond? A. fall by $11.83 B. rise..
Which of the following would lower the sum of the present values of expected cash flows?
Discuss how frequently a business plan should be updated. What elements of the business plan will be required to be updated with current year-to-date information and data?
Kinky Copies may buy a high-volume copier. The machine costs $210,000 and will be depreciated straight-line over 5 years to a salvage value of $38,000. Kinky anticipates that the machine actually can be sold in 5 years for $49,000. The firm’s margina..
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Projected free cash flows should be discounted at the firm's weighted average cost of capital to find the value of its operations -
For each of the callable bond issues in the following table, calculate the after-tax cost of calling the issue.- The firm is in the 40 percent tax bracket.
Financial analysts forecast Safeco Corporation (SAF) growth for the future to be a constant 8 percent. Safeco's recent dividend was $0.88. What is the value of Safeco stock when the required return is 12 percent?"
In 2023, a new Fed chair is appointed and resolves to return inflation to the level before 2020. Show with graphs what happens over time to the real interest rate, output, and inflation.
You own a bond with the following features: face value of $1000, coupon rate of 6% (semiannual compounding), and 15 years to maturity. The bond has a current price of $1,200. The bond is callable after nine years with the call price of $1100. What is..
Risk analysis Given the following information, calculate the expected value for Firm C's EPS. Data for Firms A and B are as follows: E(EPSA) = $5.10, and ?A = $3.61; E(EPSB) = $4.20, and ?B = $2.96. Discuss the relative riskiness of the three firms' ..
The realized gain on disposal is: The treatment of a gain under the instalment sales method is: The tax basis of property acquired in a like-kind exchange: Which one of the following would not qualify as a like-kind exchange? The Unified Gift and Inh..
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