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1. Price each bond and explain how the number of years to maturity and the coupon rate affect the current price of bonds. Assume a YTM of 7%.
1. A 4-year bond with a 9% annual coupon
2. A 4-year bond with a zero coupon
3. A 15-year bond with a 9% annual coupon
4. A 15-year bond with a zero coupon
2. What lesson can be learned from the 2008 market decline?
1. Stocks and bonds react similarly in downward markets.
2. Diversification lowers risk.
3. Market declines cause high inflation rates.
4. Global markets all react exactly the same.
5. Equity risk premiums will decline in the future.
Of the following bonds, which one has the lowest degree of interest rate risk? Larvey Co. has an unlevered cost of capital of 10.9 percent, a tax rate of 35 percent, and expected earnings before interest and taxes of $21,800. The company has $25,000 ..
One advantage of leasing voiced in the past is that it kept liabilities off the balance sheet, thus making it possible for a firm to obtain more leverage than it otherwise could have. This raised the question of whether or not both the lease obligati..
The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 5.6 percent, what is the current bond price?
A market research firm has determined that the demand for economy cars drops by 3% when the price of these cars increases by 1%. Based on this information,
What is the company’s total book value of debt? What is the company’s total market value of debt?
Businesses, especially small and medium sized businesses face significant obstacles when expanding globally. Identify the obstacles businesses face in the area of recruiting and selecting employees when first expanding into an international market. A..
What will these bonds sell for at issuance? Repeat part (b) using the straight-line method for the interest deduction.
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $140,000, and it would cost another $30,000 to modify the equipment for special use by the firm. The project would have no effect on revenues, but it ..
Morales Publishing’s tax rate is 40%, its beta is 1.10, and it uses no debt. what is firm value with the new capital structure (30% debt and 70% equity)?
Roy's Welding common stock sells for $48.96 a share and pays an annual dividend that increases by 2.5 percent annually. The market rate of return on this stock is 14.6 percent. What is the amount of the last dividend paid?
A company currently plans a capital structure comprised of preferred stock with a weight of 30% and common stock with a weight of 40%.
how much do you need to have in your bank account today to meet your expense needs over the next four years?
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