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Default Risk Premium
A Treasury bond that matures in 10 years has a yield of 4.25%. A 10-year corporate bond has a yield of 7.75%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.
A recent graduate is planning to acquire a new automobile for commuting to work in Atlanta. One option is to purchase a $25, 000 4-door sedan by paying the dealer $5, 000 at the time of purchase and financing the remaining $22, 000 to be repaid in 60..
Draw a time line showing the cash flows for a bond that has a four year maturity, semiannual coupon payments, a coupon rate of 5 percent, and a par value of $1,000.
What is marcom? How have the functions within marketing communications become more integrated? What does the Forbes writer, Judy Begehr, say about how content will impact the IMC? Why is this important?
Company A is evaluating a project that will increase sales by $50,000 and costs by $3,000 per year. The project will initially cost $70,000 for fixed assets that will be depreciated straight-line to a zero book value over the 5-year life of the proje..
Evaluate project that costs $1.5 million has a 10-year life and no salvage value. Assume depreciation is straight line over the life of the project. Sales are projected at 150K units every year over the life of the project. Price per unit is $75, var..
A US Investor is considering investing in a security of a company in a developing-country. The country's market is characterized by infrequent trading, high inflation, large market volatility, low operating leverage, political unrest, low debt usage,..
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $13007, which will be depreciated straight-line to zero over its four-year life. what is the project’s average acc..
Nathan is purchasing a desktop workstation to do modeling and simulations. He has specified a computer with a list price of $8650, and is being offered either a 10/5/5 trade discount series, or a 5/8/8 trade discount series. Which is the better deal?..
Bane Industries has capital structure consisting of 62 percent common stock and 38 percent debt. The firm's investment banker has advised the firm that debt issued with $1,000 par value, 8.3 percent coupon (interest paid semiannually), and maturing i..
Suppose an individual invests $37,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 4.1 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating e..
Determine the net after-tax cash flows for each period over the project life. Is this a good investment at MARR of 15%?
Explain the relationship between carry arbitrage and the implied repo rate? Define the conversion factor. Why are U.S. Treasury bond futures contracts designed with conversion factors?
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