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Use discrete annual compounding for question
Year (t) 1 2 3 4 5
Bond A's cash flows 0 0 0 0 1000
Bond B's cash flows 100 100 100 100 1100
Yield to maturity for both bonds 5% a. What are the current prices of the bonds? b. What is the duration of each of the bonds? c. If the yield to maturity of both bonds were to increase 75 basis points, what would be the approximate percentage change in the prices of both bonds? (Do not recalculate the prices of the two bonds.)
the three most prominent bond rating agencies are standard amp poors moodys and fitch investopedia.com 2014. ratings
By how much does the required return on the riskier stock exceed the required return on the less risky stock?
Preston Corporation is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement. If the company purchases the asset, the cost will be $110,000. It can borrow funds for four years at 12 perce..
What is the value of a European call option with an exercise price of $40 and a maturity date six months from now if the stock price is $28, the instantaneous variance of the stock price is .5, and the risk-free rate is 6%?
If you are renewing a contract with a company where inflation is expected to occur, would you increase or decrease the products sold there? You expect payments with their currency. How would you determine when to get paid and at what price to sell th..
The Fast-Growth Company recently paid a dividend of $3.20 per share. Analysts expect the dividend to grow at the rate of 28% per year for 3 years, then by 16% for 3 more years, before converging to the industry median growth rate of 7%. what is the m..
Discuss the type of individual securities or mutual funds that you believe are suitable for an aggressive investor whose primary investment goal is capital accumulation over the longer term (say 10 years or more) and why. Now think about an investor ..
Lane, Inc., has an issue of preferred stock outstanding that pays a $6.15 dividend every year in perpetuity. If this issue currently sells for $95 per share, what is the required return?
The Interest Rate of a one year security in the United states is 4.5%, while the interest rate on a one year security in Germany is 10.5% If the current exchange rate is E1=1.50 then the future exchange rate in one year according to the international..
Bank Z offers a$1,000 loan at 9.24% interest paid quarterly. Bank M offers a $1,200 loan at 9.21% interest paid monthly. Which loan has the lowest cost?
You are given the following information:-Annual demand: 2800 units- Cost per order placed: $5.25- What is the EOQ?
You own a portfolio that has 45% invested in asset A, and 55% invested in asset B. Asset A’s standard deviation is 10% and asset B’s standard deviation is 12%. The correlation coefficient between the two assets is -0.58. The expected return on the po..
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