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1) Fooling Company has a 11.4 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $25. What is the yield to call (YTC) for this bond if the current price is 103 percent of par value?
2) Consider a 5.4 percent coupon bond with nine years to maturity and a current price of $1,055.40. Suppose the yield on the bond suddenly increases by 2 percent. Find the duration to estimate the new price of the bond. And calculate the new bond price.
What constitutes total risk, and how is it measured? Of the two components of total risk, discuss which one investors can eliminate? Explain the remaining risk, and how is it measured?
Beta Industries has net income of $1,300,000, and it has 330,000 shares of common stock outstanding. The company's stock currently trades at $44 a share. Beta is considering a plan in which it will use available cash to repurchase 30% of its shares i..
Guy A bought a share of stock at the beginning of 2011 and sold this share of stock at $45 today (end of 2011). During this holding period, he received $5 cash dividend. His holding period return, capital gain yield and dividend yield are __, __, and..
What are the main features of a traditional corporation? What are the main features of a Limited Liability Company? What are the similarities and differences we can look to when trying to determine which entity will best suit our needs in a given sit..
Aloha Inc. has 8 percent coupon bonds on the market that have 13 years left to maturity. If the YTM on these bonds is 10.42 percent, what is the current bond price?
A woman purchases a 10-year par bond with 8% semi-annual coupons. The bond is priced to yield 7.5% converted semi-annually. The coupons are reinvested in a fund paying 7.0% nominal, converted semi-annually. What is her nominal annual yield on this in..
You buy a(n) 7.8% coupon, 7-year maturity bond for $982. A year later, the bond price is $1,152. Assume coupons are paid once a year and the face value is $1,000. What is the new yield to maturity on the bond (one year from now)? What is your bond's ..
The International Monetary Fund is trying to raise $550 billion in 6 years for new funds to lend to developing countries. At 4% interest compounded quarterly, how much must it invest today to reach $550 billion in 6 years?
Find the following values for a single cash flow:
Consider an asset that costs 640,000 and is depreciated straights-line to zero over its eight year tax life. the asset is to be used in a five year project; at the end of the project that asset can be sold for 175,000. If the relevant tax rate is 35%..
Karen Smith is in the 35% personal tax bracket. She is considering investing in HCA (tax table) bonds that care a 10% interest rate. What is her after-tax yield (interest rate) on the bonds?
The last gasp water company sells water by the gallon for a price of $0.75 per gallon. Fixed costs for the company are $200,000 and variable costs are $0.40 per gallon. The company already has $2,000,000 of 10% bonds on its balance sheet. Calculate t..
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