Assume that the maturity risk premium is zero

Assignment Help Financial Management
Reference no: EM131911754

The Wall Street Journal reports that the current rate on 9-year Treasury bonds is 6.10 percent, the rate on 16-year Treasury bonds is 6.50 percent, and the rate on a 16-year corporate bond issued by MHM Corp. is 7.85 percent. Assume that the maturity risk premium is zero. If the default risk premium and liquidity risk premium on an 9-year corporate bond issued by MHM Corp. are the same as those on the 16-year corporate bond, calculate the current rate on MHM Corp.’s 9-year corporate bond. (Round your answer to 2 decimal places.) Current rate %

Reference no: EM131911754

Questions Cloud

Which value of a gives the best forecast : Calculate the forecast using a = .2 and a = .3. Which value of a gives the best forecast, assuming actual demand is 95,000 gallons?
Calculate the expected rate on five-year treasury bond : Calculate the expected rate on a 5-year Treasury bond purchased five years from today, E(5r5).
Find forecasts using three and five period moving average : Calculate forecasts using a three- and five-period moving average. Graph these forecasts and the original data using Excel. What does the graph show?
According to unbiased expectations theory : According to the unbiased expectations theory, what is the 1-year forward rate for the period beginning one year from today, 2f1?
Assume that the maturity risk premium is zero : The Wall Street Journal reports that the current rate on 9-year Treasury bonds is 6.10 percent, Assume that the maturity risk premium is zero.
Prepare three-period moving-average forecasts for the data : The number of daily calls for the repair of Speedy copy machines has been recorded as follows: Prepare three-period moving-average forecasts for the data.
How cpfr can be used to reduce forecasting error : Explain how CPFR can be used to reduce forecasting error. Question 2? In the Stokely Company, marketing makes a sales forecast by developing a sales force.
How should forecasting in the company be done : In the Stokely Company, marketing makes a sales forecast by developing a sales force composite. Meanwhile, operations makes a forecast of sales based on past.
What does the market expect one-year treasury rate : what does the market expect the 1-year Treasury rate to be nine years from today,

Reviews

Write a Review

Financial Management Questions & Answers

  What is its taxable income

Bella, Inc. has net income of $3,500,000. The company‘s depreciation expense is $650,000, its interest expense is $200,000, and its income tax rate is 40%. What is its taxable income?

  Calculate the operating ratio and comment on the trend

Calculate the operating ratio and comment on the trend.- The long-term debt to operating property ratio. What does this tell about debt use?

  Cash flow analysis is setting the bid price on project

Another utilization of cash flow analysis is setting the bid price on a project. what bid price per carton should you submit?

  Considering two independent projects

You are considering two independent projects. Project A has an initial cost of $125,000 and cash inflows of $46,000, $79,000, and $51,000 for years 1 to 3, respectively. Project B costs $135,000 with expected cash inflows for years 1 to 3 of $50,000,..

  What would be common saving goals for a person

What would be common saving goals for a person who buys a five year CD is paying 5.5 percent instead of an 18- month saving certificate paying 4.75 percent?

  What is this bond current yield to maturity

Currently, the price of a 5 year, $1000 par value, 8% semi-annual coupon bond is $1025.00. What is this bond’s current yield to maturity?

  Gaap stands for general american accounting principles

The marginal tax rate for the first dollar of taxable income is higher for corporations than for individuals. The marginal tax rate for the first dollar of taxable income is higher for corporations than for individuals. Patents, trade secrets, tradem..

  What is trenthams total asset turnover ratio

If accounts recievable comprises half of the firms current assets and trentham has $6,000,000 in net fixed assets, what is trenthams total asset turnover ratio?

  What is the current share price

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $12 per share dividend 10 years from today ..

  Is the stock underpriced-overpriced or correctly priced

Is the stock underpriced, overpriced or correctly priced?

  What is its default risk premium

The real risk-free rate, r*, is 2.3%. Inflation is expected to average 2.2% a year for the next 4 years, after which time inflation is expected to average 4.5% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yiel..

  Which is tax-exempt and issued debt

The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 12 percent to help finance a new playground facility in Los Angeles. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of d..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd