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Five years ago, Cayman’s Crafters, Inc. issued new 25 year convertible bonds with a 4% coupon rate, compounded semi-annually. The bond has a par value of 10,000. The market’s required rate of return on similar securities at the time of issuance was 3.8%, compounded semi-annually. The bond indenture indicates that conversion ratio is 175, that is 1 bond can be converted in to 175 shares of Cayman’s common stock. Today, the yield to maturity on 20 year bonds is 2.6%, compounded semi-annually and 2.8%, compounded semi-annually on 25 year bonds. The current market price of the stock is $65. You purchased the bond 5 years ago. Decide whether you should convert the bond today or sell it today. Based on your decision, calculate the rate of return you earned while holding the bond over the 5 year period?
An investor is interested in purchasing a 30-year government bond carrying a 10 percent coupon rate. The bond’s current market price is $950 for a $1000 par value instrument. What is the yield to maturity? Suppose the investor sells the bond at the e..
Explain why a large bank may be willing to accept higher average loss rates on loans it is able to credit score.
Early in 2013, Maria bought shares of MBA Inc. at $27.85 per share. She received the following dividends per share (end of year). 2013 $1.50 2014 $2.00 2015 $2.50 Immediately after receiving the 2015 dividend, she sold the stock for $32.50 per share...
project required by thursday 4th december 2014..kindly quote
Hart Enterprises recently paid a dividend, D0, of $2.75. It expects to have nonconstant growth of 12% for 2 years followed by a constant rate of 5% thereafter. The firm's required return is 15%. What is the firm's horizon, or continuing, value?
The composition of the Dominion Fund portfolio is as follows: STOCK SHARES PRICE A 200,000 $31 B 300,000 $46 C 400,000 $14 D 600,000 $23 Assume that during the year the portfolio manager sells all of the holdings of Stock D and replaces it with 200,0..
Financial analysts forecast Limited Brands growth rate for the future to be 9 percent. Limited Brand’s most recent dividend was $0.75. What is the value of Limited Brands stock when the required return is 14 percent? If the current price were $18.00,..
Provide an estimate of the value of the company, indicating the proportion of the value accounted for by the company's growth prospects and determine the prospective price-earnings ratio of the company and comment on its anticipated change in value..
In what instances would an investor want to "best the market" and "hold the market"? Discuss the strategies for each and their dependence on an investor's information and trading skills.
Fred was persuaded to open a credit card account and now owes $5,150 on this card. Fred is not charging any additional purchases because he wants to get this debt paid in full. The card has an APR of 15.1 percent. How much longer will it take Fred to..
Preston Inc.'s stock has a 25% chance of producing a 30% return, a 50% chance of producing a 12% return, and a 25% chance of producing a -18% return. What is the firm's expected rate of return?
Retained earnings as reported on the balance sheet represent cash and, therefore, are available to distribute to stockholders as dividends or any other required cash payments to creditors and suppliers. After-tax operating income is calculated as EBI..
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