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Finally, imagine that $10,000,000 of this CMO was set aside to form floater and inverse floater securities that will generate payments based on the WAC 5% on the pool at origination. If the payment rule to the floater class is LIBOR+60bp and $6 million is the principal balance allocated to the floater class, answer the following questions:
A. What is the maximum cap rate on the floater class?
B. If LIBOR is currently at 3%, what is the payment to the inverse floater class?
C. If LIBOR is currently at 10%, what is the payment to the floater class?
Assets and costs are proportional to sales. The company maintains a constant 40 percent dividend payout ratio and a constant debt-equity ratio. What is the maximum increase in sales that can be sustained assuming no new equity is issued? (Do not roun..
Firm XYZ has operating profits of $90,000, taxes of $15,000, interest expense of $30,000, and preferred stock dividends of $5,000. What was the firm's net profit after tax?
A Smith industry has $24,000 in deposits that have been recorded by Smith but not by its bank. Smith also has $22,450 in outstanding checks that have not yet cleared the bank. Current balance is $14,400. Find: Net float. Is this desirable? Explain.
Perform sensitivity analysis to analyze the effect of expenses on the project’s NPV and IRR. In your analysis, allow costs to vary between $0 and $100,000, in $5,000 increments. Use Goal Seek to find what level of expenses Lewis Industries needs to j..
Describe some of the short-term investment vehicles that you use to manage your cash resources. Why did you elect these vehicles over the alternatives? What are their primary advantages and disadvantages?
The average college graduating senior will have $4,138 in credit card debt. At the national average rate of 14.73%, what will the monthly payment have to be to pay off the debt in 3 years? (Assume no further charges on the card).
During the past 6 years, the level of demand for a company's product has increased from 1,310 units per day to 1,890 units per day. What was the average annual compound growth rate over this period. Show the solution.
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. what is..
Write system of equations for the 2nd Markovitz problem: given n assets and correlations between them and given a sigma, find equations for weights of the portfolio which maximize the mean return with a given sigma. You need to use Lagrange multiplie..
Which tool(s) should we use when faced with nonconventional cash flow? Also, NPV is conceptually the best tool for capital budgeting. Why do you think firms continue to practice the others?
Describe some of the key decisions that Kaiser Permanente its management has faced within the past year or two. Identify an ethical issue the organization (Kasier Permanente) either faces or has faced in the past. If it has not been resolved, provide..
A non-dividend-paying stock is currently priced at $46.57. The risk-free rate is 5.6 percent, and a futures contract on the stock matures in five months. What price should the futures be?
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