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For each of the following characteristics which a bond may have, would their presence tend to increase or decrease the yield to maturity. The bond is convertible into common stock.
Digital Organics (DO) has the opportunity to invest $1.03 million now (t = 0) and expects after-tax returns of $630,000 in t = 1 and $730,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 11% with all-equity f..
Marginal cost of capital (LO5) The McGee Corporation finds it is necessary to determine its marginal cost of capital. McGee’s current capital structure calls for 40 percent debt, 5 percent preferred stock, and 55 percent common equity. What is the in..
An investment that pays the same amount at the end of each year for a fixed amount of time is called __________. A. an annuity due B. a perpetuity C. an excess cash flow D. an ordinary annuity
You work as an analyst at a credit-rating agency, and you are comparing firms in the construction and engineering sector. One company in the portfolio of companies you are analyzing is a Chinese firm. This firm stands out in the ratio analysis, becau..
The interest on some municipal bonds is tax free, in contrast to the interest on corporate bonds. If the current annual interest rates on otherwise similar (i.e., maturity, credit risk, liquidity) municipal and corporate bonds are 1.48% and 1.80%, re..
EXPECTATIONS THEORY - Assume that the real risk-free rate is 2% and that the maturity risk premium is zero. If a 1-year Treasury bond yield is 5% and a 2-year Treasury bond yields 7%, what is the 1-year interest rate that is expected for Year 2? Calc..
A stock has an expected rate of return of 8.3% and a standard deviation of 6.4%. Which one of the following best describes the probability that this stock will lose 11% or more in any one given year?
Returns Year X Y 1 10% 19% 2 28 40 3 17 -9 4 -18 -23 5 19 48 Calculate the arithmetic average return for X. Calculate the arithmetic average return for Y. Calculate the variance for X. Calculate the variance for Y. Calculate the standard deviation fo..
The average annual total return on bonds, including the percentage change in the bond prices, has been higher on average when a Republican president in is office. Explain why this statement may or may not be true, offering concrete evidence to suppor..
The house you want to buy costs $260 thousand. You plan to make a cash down payment of 10 percent, and borrow the rest in a 30 year mortgage at 4.8 percent APR. What will be the amount of your monthly mortgage payment?
It is now January 1, 2014, and you are considering the purchase of an outstanding bond that was issued on January 1, 2012. It has a 8.5% annual coupon and had a 30-year original maturity. What is the yield to maturity?
The Imaginary Products Co. currently has debt with a market value of $300 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $839.36 per bond. Wh..
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