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Find the convexity of a seven-year maturity, 8.4% coupon bond selling at a yield to maturity of 9.4%. The bond pays its coupons annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.)
Convexity
Discuss accrual vs. cash accounting methods. What are they, why use one over another? What do most large business use? How are expenses and revenues defined under each method?
Wesen Corp. will pay a dividend of $4.40 next year. The company has stated that it will maintain a constant growth rate of 5 percent a year forever. If you want a return of 17 percent, how much will you pay for the stock?
Suppose a particular investment project will require an initial cash outlay of $905,000 and will generate a cash inflow of $472,000 in each of the next three years. What is the project’s IRR? Suppose a company’s hurdle rate is 18%, should it accept t..
Give an example of a situation where the management of a firm is acting in a manner that is contrary to the principal goal of financial management.
Dalia’s Biomedical Supplies has a stock with a beta of 0.85 and an expected return of 10%. Assume that short-term US treasury bills are currently earning 3% and the market risk premium is 5%. If the portfolio beta is 0.6, What is the required rate of..
Indicate why you agree or disagree with the following statement: “Investing in the junk bond market offers the opportunity to realize superior investment returns compared with other debt instruments and common stocks.”
Forral Company has never paid a dividend. But, the company plans to start paying dividends in two years – that is, at the end of Year 2. The first dividend is expected to be $2 per share. The second dividend, and every dividend thereafter is expected..
You are trying to calculate how much money you should have at retirement. On your 55 th birthday you will retire and immediately make your first withdrawal of $5,833.33. How much do you have to have saved at retirement to fund these planned withdraw..
Assume that the 3-year 4.5% bond is callable in Year 1 at (101) and in Year 2 at par. The call rule is to call whenever the price exceeds the call price. Calculate the value of the bond with the embedded option. What is the value of the embedded call..
A firm has targeted a 40% growth in sales this year. Last year's cash as a percent of sales was 15%, accounts receivable 30%, and inventory 35%. What percentage growth in current assets is required to support the growth in sales under the percent-of-..
The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $33,000 per year forever. If the required return on this investment is 5.8 percent, how much will you pay for the policy?
Assume that General Electric (GE)’s current assets are $401 billion, fixed assets are $797 billion, current liabilities are $323 billion, and long-term liabilities are zero. Calculate GE’s translation exposure using current/non-current, monetary/non-..
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