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A corporate bond with a 7.550 percent coupon has fourteen years left to maturity. It has had a credit rating of BB and a yield to maturity of 9.8 percent. The firm has recently become more financially stable and the rating agency is upgrading the bonds to BBB. The new appropriate discount rate will be 8.7 percent
What will be the change in the bond’s price in dollars? (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
What will be the change in the percentage terms? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Refer to the following table for the next four problems: Stocks Portfolio Weights Beta Expected Return σ2(r) A 0.25 0.50 0.40 0.07 B 0.25 0.50 0.25 0.05 C 0.50 1.00 0.21 0.07 σ2(rm) = 0.06 a. What is the residual variance of each of the forgoing stoc..
What are the main features of a traditional corporation? What are the main features of a Limited Liability Company? What are the similarities and differences we can look to when trying to determine which entity will best suit our needs in a given sit..
A project requires an initial cash outlay of $60,000 and has expected cash inflows of $15,000 annually for 8 years. The cost of capital is 10%. What is the project’s IRR? Show your work.
Boards of directors may be legally restricted in their declaration of dividends if: A. cash must be borrowed for the dividend payment. B. dividends have increased substantially over a short period of time. C. the dividend would create a situation of ..
A(n) ____ will increase the market value of a put option.
Explain how a net present value (NPV) profile is used to compare projects. How does this profile compare to that of internal rate of return (IRR)? How does reinvestment affect both NPV and IRR? Provide support for your assertions.
A firm is expected to pay a dividend of $1.45 next year and $1.60 the following year. Financial analysts believe the stock will be at their price target of $45 in two years. Compute the value of this stock with a required return of 11.4 percent.
Stan wants to have $150,000 available in four years. What size quarterly deposits does Stan have to make into an account that pays 5.6% annual interest compounded quarterly to accomplish his goal? Assume the first deposit is made in one quarter.
Hollin Corporation has bonds on the market with 23.5 years to maturity, a YTM of 7 percent, and a current price of $1,051. The bonds make semi-annual payments. What must the coupon rate be on these bonds?
Annuity Payment and EAR You want to buy a car, and a local bank will lend you $10,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 6%, with interest paid monthly. What is the monthly loan payment..
What is the function of each of the three major financial statements? What are the basic approaches to analyzing these statement and what would an analyst hope to discern from the statements?
Marketing Concepts Inc. is considering the aquistion of Management Theories Inc. at a cash price of $1.5 million. Management Thories, Inc. has a short term liabilites of $500,000. What is the approximate net present value of this acquistion? How woul..
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