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Bond J has a coupon rate of 4.2 percent. Bond S has a coupon rate of 14.2 percent. Both bonds have ten years to maturity, make semiannual payments, and have a YTM of 9.4 percent. Requirement 1: If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) Percentage change in price Bond J % Bond S % Requirement 2: If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? ASSUME 1000 FACE BOND VALUE
You estimate a company’s earnings and dividends will grow at a constant rate of 4% and want to determine the value of the stock. The company paid a dividend yesterday of $7 per share. The current10 year treasury rate is 2.3%, and the company’s beta i..
GoFit Training Inc just paid an annual year-end dividend of $1.60 per share. It plans to increase the dividend by 7% next year, and increase it by the same percentage for the future. If the required rate of return on the stock is 8%, what is the valu..
Suppose you know that a company’s stock currently sells for $65.60 per share and the required return on the stock is 10 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield.
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributi..
Nominal Versus effective cost of debt: Black & Decker–a U.S. multinational manufacturer of small power tools–is considering financing a plant expansion in France with euro(¤) Eurobonds. Would your answer change if exchange losses on principal repayme..
How have changes in technology contributed to the globalization of markets and production? Would the globalization of production and markets have been possible without these technological changes? A democratic political system is an essential conditi..
Compare and contrast the commitments taken on by a futures contract seller versus a buyer of a put option. Compare and contrast the commitments taken on by a futures contract buyer versus a buyer of a call option.
Skylar Masterson borrowed $250,000 to buy her first home at an annual interest rate of 12 percent with monthly payments for 30 years. Ms. Masterson would like to pay off her loan ahead of schedule. What is the remaining unpaid balance when there are ..
Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $12 million, of which 75% has been depreciated. The used equipment can be sold today for $4 million, and its tax rate is 40%. What is the equipment's ..
Why is it important for managers to know the critical input variables, where critical is defined as the variables that, when changed, have the greatest effect on the project’s profitability?
What is the approximate expected percentage change in the value of each of these currencies against the dollar over the next year, when applying PPP to the inflation level of each of these currencies versus the dollar?
A bond that pays interest forever and has no maturity date (perpetual or consol bond) is similar to a 1) no growth common stock and 2) a preferred stock in what ways?
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