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An Asset will provide cash inflows of $8,000 in 4 years and $20,000 in 10 years. The assert is currently priced at 5% annual effective.
a. What is the modified duration of the asset?
b. What is the convexity of the asset?
c. Estimate the price of the asset using the approximation that uses both modified duration and convexity, if the interest rate changes slightly to 4.9% annual effective.
The dividend for Should I, Inc., is currently $1.2 per share. It is expected to grow at 20 percent next year and then decline linearly to a 5 percent perpetual rate beginning in four years.
A small business owner visits his bank to ask for a loan. The owner states that she can repay a loan at $1,250 per month for the next 3 years and then $500 per month for two years after that.
In 2010, the BowWow Company purchased 10,319 units from its supplier at a cost of $112.40 per unit. BowWow sold 14,915 units of its product in 2010 at a price of $21.12 per unit.
Patton Paints Corporation has a target capital structure of 25% debt and 75% common equity, with no preferred stock. Its before-tax cost of debt is 13% and its marginal tax rate is 40%.
Monicaclinton Ltd., a wholesale importer, is in the process of issuing $6,000,000 of 12% coupon debt with a maturity of 5 years. A sinking fund must be established to retire 60% of the issue prior to maturity.
The nuber density in a container of neon gas is 5.00X10^25 m^(-3). The atoms are moving with an rms speed of 660m/s. What are (a) the temperature and (b) the pressure inside the container
Your coin collection contains fifty-four 1941 silver dollars. Your grandparents purchased them for their face value when they were new. These coins have appreciated at a 10 percent annual rate
Calculate the current price of the Berkshire Hathaway Finance bond that matures in 2018. What does the spread say about its risk relative to the comparable maturity Treasury
sidney took a 775 cash advance by using checks linked to her credit card account. The bank charges a 3 percent cash advance fee on the amount borrowed and offers no grace period on cash advances.
ashley has a major medical health insurance policy with a $2 million lifetime limit. The policy has a $500 calendar year deductible and a 20 percent coinsurance clause.
Suppose you sell a fixed asset for $121,000 when its book value is $141,000. If your company's marginal tax rate is 39 percent, what will be the effect on cash flows of this sale
Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools
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