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Pecos manufaturing has just issued a 15-year, 12% coupon interest rate, $1000-par bond that pays interest annually. The required return is currently 14% and the company is certain it will remain at 14% until the bond matures in 15 years. a. Assuming that the required return does remain at 14%, until maturity, find the value of the bond with (1) 15 yrs, (2) 12 years, (3) 9 years, (4) 6 years, (5) 3 years, and (6) 1 year to maturity. b. Plot your findings in a part a on a set of "required return (x-axis) market value of bond (y axis) axes. c. use your findings in parts a and b to discuss the relationship between the coupon interest rate on a bond and the required return and the market value of the bond relative to its par value. d. what two possible reasons could cause the required return to differ from the coupon interest rate?
Suppose that the U.S. dollars-Chinese yuan exchange rate is fixed by the U.S. and Chinese governments. Assume also that labor is immobile between the United States and China due to high transportation costs.
What is the difference between a stock exchange and an over-the-counter market? What are the three most important stock market indexes? A company is expecting to pay a dividend per share of $20 per year forever. If investors require a 10% rate of ret..
The government often provides goods that are nonrivalrous and nonexclusive to overcome which market failure?
Discuss economic forces (supply factors, demand factors, government policy) that affect the health care market.
Emily Dorsey's current salary is $85,000 per year, and she is planning to retire 19 years from now. She anticipates that her annual salary will increase by $1,000 each year ($85,000 the first year, to $86,000 the second year, $87,000 the third year, ..
Sage has $80 to spend this month on CDs and/or DVDs. A CD costs $10 and a DVD costs $20. Draw Sage’s budget constraint (or budget line), with the number of CDs purchased on the vertical axis. What is the opportunity cost of the second DVD?
The gap between a country's potential output and its consumption is most directly related to its:
According to The Wall Street Journal, Mitsubishi Motors recently announced a major restructuring plan in an attempt to reverse declining global sales. Suppose that as part of the restructuring plan Mitsubishi conducts an analysis of how labor and cap..
In 2014, we predict the demand curve for a product will continue to shift leftward, which will tend to lower price and quantity. However, with a lower price, supply will also decrease, shifting the supply curve to the left. A leftward shift of the su..
find the current set of reserve requirements that banks must meet. Then calculate the reserve requirements for banks with the following amounts of transactions deposits.
Also identify and discuss the flows that are created when Government enters the circular flow.
Explain the importance of agriculture to Brazil’s current success. What role will agriculture play in Brazil’s future? What are the implications of this for other countries? How might countries like the United States react if Brazil is successful in ..
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