Offered some securities for sale to the public

Assignment Help Financial Management
Reference no: EM13880992

In March 2012, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $500 in March 2037, but investors would receive nothing until then. Investors paid DMF $250 for each of these securities; so they gave up $250 in March 2012, for the promise of a $500 payment 25 years later.

Assuming that you purchased the bond for $250, what rate of return would you earn if you held the bond for 25 years until it matured with a value $500?

Suppose under the terms of the bond you could redeem the bond in 2022. DMF agreed to pay an annual interest rate of .8 percent until that date. How much would the bond be worth at that time?

In 2022, instead of cashing in the bond for its then current value, you decide to hold the bond until it matures in 2037. What annual rate of return will you earn over the last 15 years?

Reference no: EM13880992

Questions Cloud

Detailed outline of a long-range information system plan : Develop a detailed outline of a long-range information system plan for Clarion-Milwaukee
How much long-term debt does the firm have : Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term..
Builders report in its income statement : 1.On June 30, 2013, Georgia-Atlantic, Inc., leased a warehouse facility from Builders, Inc.
About the capital rationing : Tule Time Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then wh..
Offered some securities for sale to the public : In March 2012, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $500 in March 2037, but investors would receive nothing until then. ..
What is the present value of their dividends : PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends o..
What should the companys bonds be priced at today : Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual ..
Why the income statement would be dated for the year ended : Explain why the income statement, statement of retained earnings, and statement of cash flows would be dated for the Year Ended December 31, 2015, whereas the balance sheet would be dated at December 31, 2015.
Is this degree of accuracy realistic : Estimate a linear demand equation that best fits the data using a regression program. Comment on the accuracy of your equation. Is this degree of accuracy realistic?

Reviews

Write a Review

Financial Management Questions & Answers

  Risk-free rate of interest

If the risk-free rate of interest (rf) is 3.5%, then you should be indifferent between receiving $1000 in one-year or. The effective annual rate for a certificate of deposit that pays 3.9% APR compounded monthly is closest to: Wesley Mouch's auto loa..

  What is the book value of the equipment at end of two year

Capital equipment costing $250,000 today has 50,000 salvage value at the end of five years. If the straight-line depreciation method is used, what is the book value of the equipment at the end of two years?

  Coupon bonds on the market with nine years left to maturity

The Timberlake-Jackson Wardrobe Co. has 7 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments. If the bond currently sells for $1,038.50, what is its YTM?

  What is the projects annual operating cash flow

Spears’ project is expected to generate net annual sales revenue of $6,000,000 at the end of each of the next four years. The new equipment costs a total amount of $4,000,000. Total operating costs (fixed and variable costs excluding depreciation) ar..

  Economists draw from breakdown of the bretton woods system

Japan has a higher ratio of stock market capitalization relative to GDP than the US. What would explain this? What lessons can economists draw from the breakdown of the Bretton Woods system? The Fed adopts an easier monetary policy. How is this likel..

  What is the implied peso borrowing rate

You have a line of credit for $1,000,000 at 4% for six months from Bank of America. You need to borrow 10,000,000 Mexican Pesos for six months. The spot FX rate is 13 P/$ and the 6-month forward rate is 13.25 P/$. All interest rates are quoted on an ..

  What is its beta

A stock has an expected return of 3%. What is its beta? Assume the risk-free rate is 7% and the expected rate of return on the market is 12%.

  Nominal rates of return

Large cap stocks had the nominal rates of return of 11.98%. The rate of inflation during the last year was 2.57 percent. What is the real rate of return for large cap stocks.

  Constant growth valuation-stock price is expected

Harrison Clothiers' stock currently sells for $35 a share. It just paid a dividend of $1.5 a share (that is, D0 = 1.5). The dividend is expected to grow at a constant rate of 3% a year. What stock price is expected 1 year from now?

  Target stock price in dollars

Fly Away, Inc., has balance sheet equity of $5.6 million. At the same time, the income statement shows net income of $823,200. The company paid dividends of $452,760 and has 200,000 shares of stock outstanding. If the benchmark PE ratio is 23, what i..

  K study the revenue source information contained in the

study the revenue source information contained in the report. present in a bar graph a comparison of the selected

  Which one of the following is the prime objective

Which one of the following is the prime objective of a residual dividend policy? _______ Maintaining a stable dividend Increasing the dividend at a steady pace Meeting the firm's investment needs Maintaining a stable dividend payout ratio

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd