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The real risk-free rate is 3%, and inflation is expected to be 2% for the next 2 years. A 2-year Treasury security yields 7.8%. What is the maturity risk premium for the 2-year security?
%
Hawkeye mining corp. is close to exhausting its current mining resources. Consequently, the firm’s earnings and dividends are expected to decline at a constate rate of 6% per year. The most recent dividend $4.10 and the required return on the stock i..
Last year, you purchased a $1,000 par value bond with a 7.5% annual coupon and a 20-year maturity. At the time of the purchase, it had an expected YTM of 8%. After receiving the coupon, you sold the bond today for $930. What is your return rate in on..
Junior Interiors market value capital structure of 62% Common Equity, 3% Preferred Stock (PS) and 35% Debt. The company does not pay dividends, and evaluates its operations as approximately 30% more risky than an “average” company in the industry. Wh..
Suppose the prevailing interest rate, or yield to maturity is 6%. All bonds have $100 face value. Price a discount bond of 10 year maturity. Show your work. Write down the formula you would use to price an annual coupon bond with annual coupon rate o..
Prepare the journal entries for the following transactions (1) assuming the company uses the perpetual processing system and (2) assuming the company uses the periodic processing system for accounting for inventory.
The Aggie Company has EBIT of $50,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an all equity firm would be 14%. Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and ..
What is the yield to maturity of a five year, semi annual euro denominated bond with a 4.5% annual coupon, selling at 98% of par value?
A 6% Treasury bond is trading at $1,040 per $1,000 of face value. It will make a coupon payment. Forward price per $1,000 of face value for a 120-day forward contract? After 30 days. The value of the bond is $1,060. Find the value of the forward cont..
A borrower is considering a 1-year adjustable rate mortgage of $250,000 that starts at 2.5%, 30 year amortization. The margin is 2.25%. The annual change caps are 2% per year. The current index is 1.25%. The life cap is 6% over the start rate. What i..
Listed below is the 2015 income statement for Tom and Sue Travels, Inc. TOM AND SUE TRAVELS, INC. Income Statement for Year Ending December 31, 2015 (in millions of dollars) Net sales $ 19.000 Less: Calculate the net sales needed to produce net incom..
If the market rate of 5% is appropriate for debt of this kind, what is the after tax cost of debt for the company?-
Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $19,000 per year for 11 years. What is the project's NPV..
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