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Face value =$1,000, coupon rate = .06, maturity = 11 yrs, market yield = 0.074, duration = 8.0 yrs. Suppose that immediately after you purchase the bond, all interest rates decline from .074 to .064 and remain at .064 thereafter (remember that bond yields, like these interest rates, are expressed as annual yields compounded semiannually; r declines from .037 to .032).
Calculate the terminal wealth and annualized yield if this bond is held to maturity.
Brandy and Ken have been colleagues for many years. Brandy invested $10,000 in their joint business, and Ken invested $15,000. Their firm, BK, develops software. If BK were now to go bankrupt, what would happen to Brandy (in terms of her equity and d..
A project has an initial cost of $50,000, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital of 9%. What is the project's IRR?
It’s the end of the summer and your firm has its annual Family Picnic Day on the Saturday of Labor Day weekend. It is a big event: games for kids, a magician who makes balloon animals, tons of great food, kegs of beer, a band for musical entertainmen..
The constant-growth dividend discount model (DDM) can be used only when the ___________.
Krispy Kreme is expected to pay a dividend of $2 next period and the dividends are expected to grow at a 4% per year. The required return is 14%. What is the current stock price?
In December 1995 Boise Cascade’s stock had a beta of 0.95.The Treasury bill rate at the time was 5.8% and the Treasury bond rate was 6.4% The firm had debt outstanding of $1.7 billion and a market value of equity of $1.5 billion; Assume Boise Cascade..
Christoph believes the Swiss franc will appreciate versus the U.S dolar in the coming 3-month period. He has $100,000 to invest. The current spot rate is $0.5820/SF, the 3-month forward rate is $0.5640/SF and he expects the spot rates to reach $0.625..
Security National Bank is quoting 1-year certificates of deposit with an interest rate of 6% compounded semi annually. Joe Saver purchased a $5,700 CD. What is the CD’s effective rate (APY)?
You have just borrowed $100,000, and you agree to pay it back over the next 25 years in 25 equal end-of-year payments plus 10 percent compound interest on the unpaid balance. What will be the size of these payments?
How many years will it take to payback an investment of $100,000 given annual end-of-year cash flows of: $25,000, $30,000, $35,000, $40,000, $55,000? (Use nominal dollars rather than discounted dollars in the payback calculation.)
You decide to take your company public by offering a total of 50,000 shares of common stock to the public in an initial public offering (IPO). You hire an underwriter who arranges a full commitment underwriting and suggests an initial selling price o..
An investor in Treasury securities expects inflation to be 2.35% in Year 1, 3.15% in Year 2, and 4.25% each year thereafter. Assume that the real risk-free rate is 1.75%, and that this rate will remain constant. Three-year Treasury securities yield 6..
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