Reference no: EM132798417
1) Compute the price of a risk-free bond with a face value of $ 1,000 that has seven years left to maturity, a coupon rate of 8%, and makes annual interest payments. Assume that it just made a coupon payment (i.e. it has seven annual payments left to make). Also assume that the current term structure of risk-free rates is as follows,
Maturity in years 1 2 3 4 5 6 7
Risk-free yields 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
2) This question illustrates the effects of default risk on a bond's yield to maturity. BBB Corp has a risky bond with face value of $1,000, annual coupon rate of 12%, maturity of 10 years, and an opportunity cost of capital of 9%. If bondholders expect that there is only a 50% chance that they will receive each of the last 5 payments, what is this bonds yield-to-maturity? Enter your answer as a percent without the "%"; round your final answer to two decimals.
3) JAN Corp. will pay a dividend of $2.00 per share one year from now and a dividend of $2.50 per share two years from now. You also expect the stock price to be $30.00 two years from now (immediately after it pays the $2.50 dividend). According to the dividend discount model what should be the price of a share of JAN Corp.'s stock? Assume that JAN Corp.'s annual cost of equity capital is 9.00%. Round your final answer to two decimal places.
4) A share of Scott, Inc.'s common stock is currently priced at $130. Given that Scott, Inc. will pay $5.00 in dividends one year from now and is also expected to have a stock price of $140 one year from now (immediately after it pays the $5.00 dividend). Which of the following is closest to Scott, Inc.'s annual cost of equity capital, dividend yield, and expected capital gains?
Group of answer choices.
a) Cost of equity capital = 11.54%; Dividend yield = 3.85%; Capital gains = 7.69%
b) Cost of equity capital = 15.5%; Dividend yield = 8.5%; Capital gains = 7.00%
c) Cost of equity capital = 7.69%; Dividend yield = 3.85%; Capital gains = 11.54%
d) Cost of equity capital = 20%; Dividend yield = 15%; Capital gains = 5%
|
What is the firms optimal capital budget
: The manager of united medtronics are evaluating the following four projects for the coming budget period. the firms corporate cost of capital is 14 percent.
|
|
Analyse the internal control weakness in the system
: Describe the controls that could have prevented Miss Emma from perpetrating this fraud and discuss the accounting and audit problems need to be resolved
|
|
What is the equation of the capital allocation line
: A portfolio's expected risk premium is 7% and its standard deviation is 35%. The risk free rate is 2%. What is the equation of the Capital Allocation Line going
|
|
Identify a clinical topic and related nursing practice issue
: SBAR, Communication, and Patient Safety: An Integrated Literature Review - Identify a clinical topic and related nursing practice issue
|
|
Compute the price of a risk-free bond
: 1) Compute the price of a risk-free bond with a face value of $ 1,000 that has seven years left to maturity, a coupon rate of 8%, and makes annual interest paym
|
|
What are the characteristics of the ideal parents
: Review the definitions of parenting styles. The parenting styles consist of: Indulgent Parenting. What are the characteristics of the ideal parents?
|
|
Find the minimum variance hedge ratio
: You are a portfolio manager and you would like to hedge a portfolio daily over a thirty-day horizon using futures. The table below provides data on the values
|
|
Explain the function of the american court system
: Each state within the United States has its own unique judicial selection process within its own court system. Each state also has unique steps that can be take
|
|
Calculate the unit variable cost-total fixed costs
: 1. Calculate the unit variable cost, total fixed costs, unit contribution margin, contribution rate, net income, and break- even in both units and
|