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It is now January 1, 2012, and you are considering the purchase of an outstanding bond that was issued on January 1, 2008. It has a 7 percent annual coupon and had a 30-year original maturity. (It matures on December 31, 2037.) There were 8 years of call protection (until December 31, 2015), after which time it can be called at 109.5 percent of par, or $1,095. Interest rates have increased since the bond was issued, and it is now selling at 87 percent of par, or $870. If you bought this bond, what rate of return would you probably earn, assuming you hold the bonds until they either mature or are called?
Fort Smith Drywall expects sales next year to be $600,000 if the economy is strong, $500,000 if the economy is steady, and $300,000 if the economy is weak. The owner believes the probability of a strong economy is 20%, the probability of a steady eco..
Lloyd Blankfein would like to supplement his low pension paid by his employer Goldman Sacks. His personal banker Jamie Dimon told him that he could pay $1,000 every month for ten years (making 10 × 12 = 120 payments at the end of each month until her..
firm u is an all equity firm and has a market value of 500000 and ebit of 100000. firm l is identical in all respects
Leslie's Unique Clothing Stores offers a common stock that pays an annual dividend of $1.80 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a 15.60 per..
Griffith Delivery Service purchased a delivery truck for $33,600. The truck has an estimated useful life of six years and no salvage value. For purposes of preparing financial statements, Griffith is planning to use straight-line depreciation. What i..
BUYING STOCK WITH COMMISSION-At your discount brokerage firm, it costs $10.40 per stock trade. How much money do you need to buy 500 shares of Ralph Lauren (RL), which trades at $85.22?
Assume the following: Annual Salary = $65,000 Other monthly debt payments = $250 Estimated monthly property taxes & insurance = $500 Mortgage interest rate = 6.0% Mortgage term = 30 years Down payment = 10% what is the affordable home purchase price ..
A borrower is considering a 1-year adjustable rate mortgage of $250,000 that starts at 2.5%, 30 year amortization. The margin is 2.25%. The annual change caps are 2% per year. The current index is 1.25%. The life cap is 6% over the start rate. What i..
Atchley Corporation’s last free cash flow was $1.55 million. The free cash flow growth rate is expected to be constant at 1.5% for 2 years, after which free cash flows are expected to grow at a rate of8.0% forever. The firm's weighted average cost of..
Suppose the forward rate satisfies f(0, T1, T2) > [B(0,T1) / B(0,T2)] - 1. Write down, showing all details, an arbitrage strategy that yields a risk-less profit of (1 + f(0, T1, T2)) - B(0,T1) / B(0,T2) dollars.
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air ..
Big Steves, maker of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $21,000 per year for 9 years. What are the projects NPV us..
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