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You purchased a bond with the following characteristics: $1,000 par value 5.5% coupon Semiannual payments 18 years to maturity Bond was priced to yield 6%. For the first three years after you purchased the bond interest rates remained constant at 6%. Then interest rates dropped to 5.4% and remained at that rate for five years. Then rates dropped further to 4.8% and remained at that rate for two more years. Rates dropped even lower to 4% and remained at that rate until the bond matured. Assume that all coupon interest payments were reinvested at the prevailing markets rate(s). Calculate the realized yield of this investment.
Some time ago, Julie purchased eleven acres of land costing $14,690. Today, that land is valued at $27,514. How long has she owned this land if the price of the land has been increasing at 4 percent per year?
When a bond goes on special, the repo rate for borrowing against that bond goes below the General Collateral Rate (GCR) which applies to all other Treasury bonds. Why does that not lead to arbitrage opportunities?
Hollygan Co. must choose between gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) Calcu..
A company has net income of $186,000, a profit margin of 8.9 percent, and an accounts receivable balance of $125,370. Assuming 75 percent of sales are on credit, what are the company’s days sales in receivables? (Use 365 days a year. Do not round int..
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the pr..
CellTech is proposing the launch of its new Cphone 5. The Cphone 5 will cost $8 million to develop and produce cash flows of $3.5 million for three years. The release of the Cphone 5 is also expected to cannibalize sales of the Cphone 4 and reduce th..
Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $0.54 and lasts for 1,000 hours. If you require a 10 percent return, at what cost per..
Watkins Inc Income Statement For the Year ended December 31, 2010 Sales (@ $50) 250,000 COGS 120,000 Gross Margin 130,000 Less selling & admin Variable selling 75,000 Fixed selling 10,000 Fixed admin exp 15,000 100,000 Net Income $30,000 Watkins manu..
Suppose that the parents of a young child decide to make annual deposits into a savings account with the first deposit on the 5th birthday and the last on the 15th birthday.
The statement "We've got too much invested in that project to pull out now" possibly illustrates the need to:
You own 1,650 shares of stock in Avondale Corporation. You will receive a dividend of $1.50 per share in one year. In two years, Avondale will pay a liquidating dividend of $54 per share. The required return on the company's stock is 20 percent. Supp..
Suppose Company paid a dividend of $5.00 per share last year. The dividend is expected to grow at an annual rate of 25% for the next two years and at a constant annual rate of 6% thereafter. Assume a discount rate of 14%. Estimate the current value p..
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