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Explain why warrants are rarely exercised unless the time to maturity is small?Warrants are seldom exercised till the time to expiration is small because the market price of the warrant is greater as compared to the exercise value. The holder of the warrant would hence sell it in the secondary market in place of exercising it if he or she wishes to cash in.
How is present value influenced by a change in the discount rate? Present value is oppositely related to the discount rate. Alternatively, present value moves in the reverse dire
Illustration The monthly yield of a mortgage backed security is 0.75%. Find out the annual yield for this security. Solution Annual yield = 2 [(1 + 0
Calculate the Price of Commonwealth bonds Commonwealth Company has a 10% coupon bond with a par value of $1000, The current yield to maturity on new bonds is 8%. If interest is
your firm is considering its household products division. you identify John Lewis as a firm with comparable investments. suppose J.L. equity has a market capitalization of 150 bill
OTC refers to financial securities whose sale and purchase are not conducted over a stock exchange.
Treasury Notes or T-notes are the securities issued with maturities of more than one year and but not more than 10 years. All these securities are coupon securiti
Break Even Period: It is also important to compare the returns from the equity stock and the bond to determine the profitability of both investments. Assume that the dividend p
7. Bill Peters is the investment officer of a $60 million pension fund. He has become concerned about the big price swings that have occurred lately in the fund’s fixed income sec
Q. What are the Difficulties of Capital Budgeting? 1. Measurement Problems: - Identifying as well as measuring the costs and benefits of a capital expenditure proposals tend to
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