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(Bond valuation) Fingen’s 19-year, $1,000 par value bonds pay 14 percent interest annually. The market price of the bonds is $890 and the markets required yield to maturity on a comparable-risk bond is 17 percent.
a. Compute the bonds yield to maturity
b. Determine the value of the bond to you, given your required rate of return.
c. Should you purchase the bond?
The 6-month, 1-yr, 1.5-yr, and 2-yr interest rates are 1.75%, 2.00%, 2.25% and 2.50% with continuous compounding. Calculate the equivalent 6-month, 1-yr, 1.5-yr, and 2-yr interest rates with “quarterly” compounding.
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A call option on an S&P 500 futures contract has an exercise price of 1490; the call premium is currently $6.50. On the same date, a put option on the S&P 500 futures contract has an exercise price of 1490; the put premium is currently $7.50. The two..
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An unlevered firm has a perpetual EBIT = $1500. The current value of the firm is Vu = $1500. The share count of the firm is N0 = 1000. The firm considers repurchasing its shares by issuing debt. What is the value of the firm after the recap? How many..
Charleston Industrial revised its dividend policy and decided that it wants to maintain a retained earnings account of $1 million. The company's retained earnings account at the end of 2011 was $750,000, and it had earnings Available to common stockh..
A 5-year maturity 6% coupon rate bond is selling to yield 8%. The bond pays interest semi-annually. One year later, interest rates decrease from 8% to 5%. Par = 1,000. What is the current price of the 5-year maturity 6% coupon bond selling to yield 8..
You are considering a job offer. The job offers an annual salary of $52,000, $55,000, and $60,000 a year for the next three years, respectively. The offer also includes a starting bonus of $2,000 payable immediately. What is this offer worth to you t..
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