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1. Discuss bonds as investments.
2. “An inverted yield curve is a good predictor of US recessions”. Discuss the validity of this statement and explain in detail your reasoning.
3. Corporations prefer bonds over preferred stock for financing their operations because
A. preferred stocks require a dividend.
B. bond interest rates change with the economy while stock dividends remain constant.
C. the after-tax cost of debt is less than the cost of preferred stock.
D. none of these.
The cost of retained earnings is less than the cost of new outside equity capital. Consequently, it is totally irrational for a firm to sell a new issue of stock and to pay cash dividends during the same year. Discuss the meaning of those statements.
On December 28 each year, you are planning to make a charitable donation of $2880 and are in the 25 percent tax bracket. You are planning to deposit the tax savings in a savings account for the next 13 years at 4 percent, what will be the future valu..
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Your firm has an average collection period of 28 days. Current practice is to factor all receivables immediately at a discount of 1.8 percent. What is the effective cost of borrowing in this case?
You have $16,000 to invest in a mutual fund with a NAV = $45. You choose a fund with a 4% front load, a 1% management fee, and a 0.25% 12b-1 fee. Assume that the management and 12b-1 fees are charged on year-end assets. The gross annual return on the..
The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000. It has 4 years to maturity and is selling in the market for $917. The bond makes annual coupon payments. What is the duration of the bond? A) 5.5..
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Screenshot, Inc., just paid a dividend of $4.25 per share on its stock. The dividends are expected to grow at a constant rate of 3.8 percent per year, indefinitely. Assume investors require an 13.6 percent return on this stock. What is the expected p..
You are expecting to receive 10M Euros 3-months from now. The interest rates are 3% in the US and 5% in Germany. Current spot exchange rate: $1.20/Euro and 3-month Forward rates: $1.15/Euro. How much $ will you have 3-months from now if you hedge thr..
Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $150,000 (all on credit), and it earned a net profit of 5%. Its inventory turnover was 7.606375 times during ..
Barbara Worrell and Rita Young are neighbors in Denver. Barbara works as a software engineer for Creative Games Corporation, a computer game company, while Rita works as an executive for United Manufacturing Company. Which plan is more desirable and ..
Using a minimum of seven financial ratio compare the 2012, 2013, and 2014 yearend financial results of the following corporation: Walt Disney corporation, Oracle corporation, Ford motor company
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