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Bond with face value of 1000 EURO, 2 years time to maturity and 10 coupon rate, makes semiannual coupon payments and provides 8% yield-to-maturity.
a) Calculate the price of the bond.
b) If the yield-to-maturity would increase to 9%, what will be the price of the bond? How this change in the yield-to-maturity would influence bond price?
A car is financed as follows: $2,000 as down payment plus equal monthly payments at 8% annual interest rate compounded monthly for 3 years. Original price of the car was $12,500. It is expected that maintenance costs are going to be $700 in the first..
Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $11.65, but management expects to reduce the payout by 4 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a sha..
A bank offers a home buyer two options for mortgage payment: If you will keep the mortgage for 30 years, what is the net present value of the monthly savings (or costs) of paying the points? Hint: net present value of the savings is the present value..
A bi-level mall is under construction. Installation of only 10 escalators is planned at the start although the ultimate design calls for 16. The question arises whether to provide necessary facilities that would permit the installation of the additio..
Which of the following actions, all else being equal, will increase the sustainable growth rate - Calculate the value of each share after the dividend payout.
Imagine you have a portfolio consisting of 30% IBM stock which has an expected return of 8% and a standard deviation of 42%. The remaining 70% of the portfolio is invested in Toyota stock which has an expected return of 5% and a standard deviation of..
What difference does it make to the value of the bond and the value of the conversion option if the bond is callable any time within the first 2 years for $115?
Great Lakes Shipping is an all-equity firm with anticipated earnings before interest and taxes of $439,000 annually forever. The present cost of equity is 16.4 percent. Currently, the firm has no debt but is considering borrowing $1.25 million at 8.5..
Name three controls of weather and climate.
A five-year project has an initial fixed asset investment of $340,000, an initial NWC investment of $36,000, and an annual OCF of −$35,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
An investor notices that an ounce of gold is priced at $1,318 in London and $1,325 in New York. What action could the investor take to try to profit from the price discrepancy? Which of the six trading activities would this be? What might be some imp..
A project is acceptable if the required rate of return exceeds the internal rate of return. Positive net present value projects provide returns in excess of what financial markets require. Equipment trust certificates are, in essence, a form of leasi..
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