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1. A STRIPS has a $9,000 par value and a market value of $7,050. The time to maturity is 5 years. What is the yield to maturity?
A. 2.07 percent
B. 3.00 percent
C. 4.94 percent
D. 5.00 percent
E. 5.07 percent
2. You have just received notification that you have won the $3 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 60 years from now.
a. What is the present value of your windfall if the appropriate discount rate is 10 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Present value $
1) What is the future value of an annuity of 17 deposits of $2300 each year with nominal rate of interest being 10% compounded continuously?
An unlevered firm has expected earnings of $33,062.50 and a market value of equity of $287,500. The firm is planning to issue $50,000 of debt at 7 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes...
Match each of the following behaviors with the appropriate bais, as discussed in the chapter. Wanda owns shares in happy Clan Oil Exploration, but due to recent events, the share price is down 30 percent from when she bought. Drew doesn't believe his..
A proposed new bus route is expected to require 12 new buses and to operate a total of 720,0000 vehicle miles per(for all 12 buses) and 48,000 vehicle- hours per hours (total for all 12 buses) Buses cost $550,000 each, have a 10 year life, $30-000 ea..
A company is considering a 5-year project that opens a new product line and requires an initial outlay of $78,000. The assumed selling price is $93 per unit, and the variable cost is $66 per unit. Fixed costs not including depreciation are $16,000 pe..
A project has an initial cost of $100,00. The project has an estimated cost of capital of 10%. Calculate project's NPV, IRR, and payback period.
Cavo Corporation expects an EBIT of $19,750 every year forever. The company currently has no debt, and its cost of equity is 15 percent. The corporate tax rate is 35 percent. What is the current value of the company? Suppose the company can borrow at..
What is the relationship between the price of a bond and its YTM? Explain why some bonds sell at a premium over par value while other bonds sell at a discount. What do you know about the relationship between the coupon rate and the YTM for premium bo..
An air purifier for use in manufacturing semiconductors is placed in service with a first cost of $50,000. It will be used for 8 years, have an annual gross income less operating expenses of $14,000 and will have no salvage value. Corporate income ta..
Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with five years to maturity (YTM) has a coupon rate of 3%. the yield to maturity of the bond is 9.90%. Using this information and ignoring the other costs involved, calculate th..
Consider a 6% coupon bond making annual payments if it has 3 years until maturity and has a yield to maturity of 8%. (show work) What is the duration of this bond? If the market yield increases by 80 basis points, what is the actual percentage change..
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7.3%. Vandell's free cash flow (FCF0) is $2 million p..
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