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1. Consider a coupon bond with a $100 face value and a coupon payment equal to 3% of the face value per year.
a. If there is one year to maturity, find the yield to maturity if the price of the bond is $99.50.
b. If the risk-free rate is 2.25%, calculate the default risk premium.
2. A zero coupon bond with a face value of $100 has one year until maturity. There is a 99% chance you will receive the promised payment in 1 year. The only other possible outcome is getting $0 of the promised payment. If the risk-free rate is 2%, how much would a risk-neutral investor be willing to pay for this bond?
This call has two periods to go before expiring. Its stock pr=is 0.90. The stock pays a dividend at the end of the first period at the rate of 0.06. Find the value of the call.
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Tyler Company purchased a machine 3 years ago at a cost of $150,000. It had an expected life of 10 years at the time of purchase and an expected salvage value of $5,000. The firm has an Actual Collection Period of 63 days and pays its bills after 25 ..
A trader creates a long butterfly spread from options with strike prices $60, $65, and $70 by trading a total of 400 options. The options are worth $11, $14, and $18. What is the maximum net gain (after the cost of the options is taken into account)?..
What effective annual rate results from daily compounding of 8%? Suppose that you have a mortgage on your house. You make monthly payments. Your bank quotes APR equal 8.5% per year. What is your effective annual rate?
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