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The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). (A) Suppose that today you buy a bond with an annual coupon of 9 percent for $1,180. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (B) Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (C) What is the HPY on your investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 10%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds?
A Treasury bill that settles on May 18, 2012, pays $100,000 on August 21, 2012. Assuming a discount rate of 3.23 percent, what is the price and bond equivalent yield? Use Excel to answer this question.
Suppose you bought a 8 percent coupon bond one year ago for $950. The bond sells for $1,005 today. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? What was your total nominal rate of return on th..
The amount of an invoice from Franklin Decks and Porches is $5182.94 with terms of 4/7, 2/15, n/30. If the invoice is dated August 15, what amount should be paid on August 25?
You borrowed $25,000 from your parents to buy a car. They want their money back in 5 months with interest at 6% (simple interest rate). What is the total amount you must pay them in 5 months (principle plus interest)?
Assume that Leyda Inc. has an outstanding bond with a 6.5% annual coupon, exactly 10 years to maturity, a par value of $1000 and a yield of 5%. The bond is convertible into 100 shares of Leyda stock, which is currently priced at $10.25 per share. Wha..
Seventeenth Bank has an issue of 9% preferred stock with a $100.00 par value that just sold for $119 per share. What is the bank’s cost of preferred stock?
Corner Market is considering adding a new product line that is expected to increase annual sales by $418,000 and cash expenses by $337,000. The initial investment will require $237,000 in fixed assets that will be depreciated using the straight-line ..
You anticipate that you will need $2,500,000 when you retire 40 years from now. You just joined ExxonMobil and your first annual salary is $200,000 to be received one year from today. You also received one time signing bonus of $50,000 today.
Over the coming year Ragwort’s stock price will halve to $50 from its current level of $100 or it will rise to $200. The one-year interest rate is 10%. What is the delta of a one-year call option on Ragwort stock with an exercise price of $100? Use t..
Kendall borrows $100,000 on Jan 1, 1993 to be repaid in 12 annual installments at an effective annual rate of interest of 8%. The first payment is due on Jan 1, 1994. Instead of annual payments she decides to make monthly payments equal to one-twelft..
Commercial paper offers which of the following advantages to the issuer? A "normal" term structure of interest rates would depict. Money markets include which of the following securities? In break-even analysis, the contribution margin is defined as...
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