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Financial Data Sets:
1. Compute Bond Price Compute the price of a 3.8 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond?
2. Compute Bond Price Compute the price of a 5.6 percent coupon bond with ten years left to maturity and a market interest rate of 7.0 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond?
3. Value a Constant Growth Stock Financial analysts forecast Safeco Corp.'s (SAF) growth rate for the future to be 8 percent. Safeco's recent dividend was $0.88. What is the value of Safeco stock when the required return is 12 percent?
4. Expected ReturnEcolap Inc. (ECL) recently paid a $0.46 dividend. The dividend is expected to grow at a 14.5 percent rate. At a current stock price of $44.12, what is the return shareholders are expecting?
5. Risk, Return, and Their Relationship Consider the following annual returns of Estee Lauder and Lowe's Companies:
Estee Lauder
Lowe's Companies
Year 1
29.4
-6.0 %
Year 2
-26.0
16.1
Year 3
17.6
4.2
Year 4
49.9
48.0
Year 5
-16.8
-19.0
Compute each stock's average return, standard deviation, and coefficient of variation. Which stock appears better? Why?
The common stock of Winsson, Inc. is currently priced at $52.50 a share. One year from now, the stock price is expected to be either $54 or $60 a share. The risk-free rate of return is 4%. What is the value of one call option on Winsson stock with..
An investment project costs $15,000 and hasannual cash flows of $3,800 for six years.
1. How do you think each of the following items would affect a company's ability to attract new capital and the flotation costs involved in doing so?
a video rental stores will cost 650000 to open. assuming annual sales of 1 million variable costs of 35 fixed costs of
Compute the internal rate of return of each investment?
A real estate agent wishes to determine whether tax assessors and real estate appraisers agree on the vales of homes. A random sample of the two groups appraised 10 homes. The mean and standard deviations are shown below. Is there a significant di..
Why is notional principal often exchanged in a currency swap but not in an interest rate or equity swap? Why would the parties to a currency swap choose not to exchange the notional principal?
What is the project's terminal cash flow? if PDF Corp needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being deprec..
say you are the manager of a perfectly competitive firm selling a product. your business is making a loss because total
Robert Shiller of Yale University has suggested a variation on ARMs in which mortgage interest rates are tied to inflation, not to short-term interest rates. - Discuss the pros and cons of this idea for banks and for borrowers.
At what debt ratio is the company's WACC minimized? Round your answer to two decimal places.
explain the factors affecting the choice of a minimum cash balance
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