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1. A five-year bond provides a coupon of 5% per annum payable semiannually. Its price is 104. What is the bond's yield? You may find Excel's Solver useful.
2. Suppose that LIBOR rates for maturities of one, two, three, four, five, and six months are 2.6%, 2.9%, 3.1%, 3.2%, 3.25%, and 3.3% with continuous compounding. What are the forward rates for future one-month periods?
In 2008 Virgil Hurd was kicked out of his home by his ex-wife. At that time he moved into his horse trailer (the “Trailer”) to keep warm. The Trailer is twenty feet long and six feet wide. Virgil gets electricity for the Trailer from a socket and wat..
US Silver mines silver at a total cost of $9 per ounce. To hedge their sale price, US Silver uses a collar strategy by buying Puts with strike $9.75 and selling Calls with strike $10.25. The respective premia are P = 0.246 and C = 0.374. Assume that ..
Suppose CAPM works, and you know that the expected returns on Google and IBM are estimated to be 13.50% and 10.75%, respectively. You have just calculated extremely reliable estimates of the betas of Google and IBM to be 1.22 and 0.80, respectively. ..
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.72 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. What is the maximum initial cost the co..
Alexander Corp. will pay a dividend of $3.30 next year. The company has stated that it will maintain a constant growth rate of 5.25 percent a year forever. If you want a return of 18 percent, how much will you pay for the stock?
Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one year. The interest rate is 12.5 percent. You and the lender agree that the interest on the loan will be 0.125 × $20,000 = $2,500. So the lender ..
Bradbury Breathe Easy Corporation just announced that its net income was lower than last year. Nevertheless, analysts estimate that the company’s net cash flow increased. What factors could explain this inconsistency?
A gift of a partial or future interest in property is generally nondeductible. However, there are specific exceptions. A current deduction is available for all the following contributions to a qualified organization EXCEPT:
Consider the following balance sheet data for Lexi’s Computer Stores: Cash $ 52,000 Accounts payable $ 64,500 Receivables 204,500 Short-term bank note 122,000 Inventories 175,500 Accrued wages and taxes 52,500. How much of the company's profits have ..
Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments). The following table summarizes the YTM for similar ten-year..
Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 107 − 100. Dudley Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the fu..
You own a portfolio of investment in two stocks, A and B. Total investment in stock A is valued at $6,500 and has an expected return of 11.2 percent. Stock B has an expected return of 8.1 percent. Total investment in stock B is $3,500. What is the ex..
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