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Assume you buy a 5-year 10% annual bond which is priced to yield 14%. Face value is 1000. Calculate the following items.
1. Determine the current price of the bond.
2. Determine the bond’s Macaulay Duration (D).
3. Determine the bond’s Modified Duration (Dmod). Interpret this value.
4. Given the price you calculated in part 1 above, if open market interest rates are expected to drop by 75 basis points in the immediate future (from 14% down to 13.25%), determine:
a. The percentage (%) change in price this bond can expect to realize when this change in yields occurs.
b. The approximate dollar ($) value change [plus or minus] this bond can expect to see with this change in open market rates.
c. The approximate new price this bond can expect to sell for after the change in open market yields.
Broncs Bank has the following liabilities and equity categories: What would be the bank’s total liabilities and capital if owners’ capital were 75% the size of Other Liabilities? If Total Liabilities and Capital were 18 million what would be the size..
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You bought a stock six months ago for $80.82 per share. The stock paid no dividends. The current share price is $86.59. What is the APR and EAR of your investment?
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1. firm a has 10000 in assets entirely financed with equity. firm b also has 10000 in assets but these assets are
1.calculate the after-tax cost of debt under each of the following conditionsa.interest rate 8 percent tax rate 0
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