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Bond J has a coupon rate of 5.6 percent. Bond S has a coupon rate of 15.6 percent. Both bonds have nine years to maturity, make semiannual payments, a par value of $1,000, and have a YTM of 12.2 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price Bond J % Bond S % If interest rates suddenly fall by 2 percent instead, what is the percentage price change of these bonds? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price Bond J % Bond S %
Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at rd = 9%, and its common stock currently pays a $3.25 dividend per share (D0 = $3.25). The stock's price is currently $21.75, its dividend is expected t..
Slow Roll Drum Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide $180,000 in additional credit sales, 12 percent are likely to be uncollectible. Compute the return on incremental investment.
Suppose the equity market premium is 0.04 and a security with a beta of +1.5 has an equilibrium expected rate of return of 0.10. If the government wishes to issue risk-free zero-coupon bonds with a term to maturity of one period and a face value per ..
In evaluating credit risk, discuss the statement: "An increase in collateral is a direct substitute for an increase in default risk." In your discussion, evaluate the credit risk premium on a one-year loan with and without collateral using the follow..
You have these 4 assets. So if this was a portfolio, how would you change the weights of the assets to improve performance of your portfolio?
Consolidated Enterprises issues €10 million face value, five-year bonds with a coupon rate of 6.50 percent. At the time of issuance, the market interest rate is 6.0 percent. Using the effective interest rate method of amortization, the carrying value..
Robinson's has 15,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $36 a share. The balance sheet shows $15,000 in the common stock account, $315,000 in the capital in excess of par account, and $189,000 in th..
McIver, Inc. currently pays a $2 annual dividend. Investors believe that dividends will grow at 20% next year, 12% for the following year, and 6% annually thereafter. The required return is 10%. What is the current price of the stock?
The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece of equipment it originally purchased for $300,000. What is the book value of the equipment?
In order to fund her retirement, Michele requires a portfolio with an expected return of 0.11 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..
Dd a new line of bow ties that will require the acquisition of new knitting and tying machine. The machine will cost $1,000,000. It is classified as a 7-year MACRS asset and will be depreciated as such. Interest costs associated with financing the eq..
1. The Los Angeles Lakers are sold for 650 Million. At a tax rate of 25% what is the new owner's yearly tax savings if he uses straight line depreciation of the purchase price over the full 15 years allowed by the IRS?
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