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A 20-year maturity bond has a 8% coupon rate, paid annually. It sells today for $977.42. A 10-year maturity bond has a 7.5% coupon rate, also paid annually. It sells today for $989.5. A bond market analyst forecasts that in five years, 15-year maturity bonds will sell at yields to maturity of 9% and that 5-year maturity bonds will sell at yields of 8.5%. Because the yield curve is upward-sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7%.
a. Calculate the annual return for the 20-year maturity bond over the next five years. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected rate of return:_________%
b. What is the expected return of the 10-year bond. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Expected rate of return:_______%
Name some examples of policy areas and tools that should be considered by decision makers as they develop their recovery plan. Explain why each should be considered.
In April 2013 a pound of apples cost $1.48, while oranges cost $1.12. Three years earlier the price of apples was only $1.27 a pound and that of oranges was $.98 a pound. a. What was the annual compound rate of growth in the price of apples What was ..
Red Zone Inc. desires a weighted average cost of capital of 5 percent. The firm has an after-tax cost of debt of 4.8 percent and a cost of equity of 15.2 percent (assume that these costs do not change with the capital structure). What debt-equity rat..
Hank and Wendy are married to each other, are both US citizens, and have two minor children. Their property consists of the following: Commercial property (cost $850,000; fair market value $5,300,000) held in Hank's name, as his separate property. Wh..
If a U.S. investor in the U.S. stock market experiences a negative rate of return, is it possible for a French investor with the same investment to experience a positive rate of return?
A 3.80 percent coupon municipal bond has 10 years left to maturity and has a price quote of 94.35. The bond can be called in four years. The call premium is one year of coupon payments. Current yield % Compute the yield to maturity. Compute the yi..
The Genesis Energy operations management team, nearing completion of its agreement with Sensible Essentials, was asked by senior management to present a capital plan for the operating expansion. The capital plan was not to be a wish list but an analy..
Choose one of the methods for calculating a firm’s cost of capital and provide a detailed explanation of how a firm would use this to calculate their cost of debt? How would a firm’s tax rate impact your chosen cost of capital?
Suppose you buy a 7.20 percent coupon bond today for $980.00. The bond has a face value of $1,000, has 16 years until maturity, and pays interest semi-annually. Three (3) years after purchasing the bond you decide to sell it. At that time the YTM on ..
You have been asked to make a short presentation at your company’s annual capital budget meeting to present an analysis of the strengths and weaknesses of the following capital budgeting selection methodologies: NPV, payback, IRR. Describe how you ..
Johnson products earned $3.10 upper share last year and paid a $1.25 per share dividend. If ROW was 16 percent, what is the sustainable growth rate?
Calculate the number of shares in issue if the company where to pay the dividend and Calculate the number of shares in issue if the company where to repurchase its shares.
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