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You own a bond that is currently quoted at 97, has a face of $1,000, a coupon of 6% and matures in 10 years. You are considering selling the bond.
A. Should you sell it if your discount rate is 7%? Explain.
B. Suppose the bond is quoted at 89. Should you sell it? Explain.
C. What is the lowest price for which you would sell the bond? Explain.
Kevin hams plans to borrow 8000 for five years. The loan will be repaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 6 percent. How much will Kevin have to..
You have a contract that entitles you to receive $1 million 20 years from now. But can't wait and want your money now. You want to sell your contract. What is a fair price for it? Assume the risk free, inflation adjusted interest rate is 3% per year,..
An investment has an expected return of 11 percent per year with a standard deviation of 24 percent. Assuming that the returns on this investment are at least roughly normally distributed, how frequently do you expect to earn between -13 percent and ..
Assume continuously compounded interest at rate r. You plan to borrow 1,000 today, 2,000 one year from today, 3,000 two years from today, and then pay off all these loans three years from today. How much will you have to pay?
If a firm can shift its capital structure so as to change its weighted average cost of capital (WACC), which of the following results would be preferred? The before-tax cost of debt, rd, is the same as the
an fi must make a single payment of 500000 swiss francs in six months at the maturity of a cd. the fis in-house analyst
Calculate a firm's required rates of return for both of its equity components: Its common stock sells for $50 per share and will pay a $6 dividend next year which is expected to grow at a constant 5% rate. Its preferred stock sells for $22.50 per sha..
Pinches Salt Company has the following income statement for 2010: Compute Pinches's DOL, DFL, and DCL. If sales increase to $5,500,000, what is your forecast of EPS?
Hanson Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,824,000 on March 1, $1,212,000 on June 1, and $3,057,100 on December 31.
Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $25,600, and the company expects to sell 1,410 per year. The company currently sells 1,910 units of its existing model per year..
George Jefferson established a trust fund that provides $178,500 in scholarships each year for worthy students. The trust fund earns a 5 percent rate of return. How much money did Mr. Jefferson contribute to the fund assuming that only the interest i..
Consider a real estate project. It costs $1,000,000. Thereafter, it will produce $60,000 in taxable ordinary income before depreciation every year. Favorable tax treatment means that the project will produce $100,000 in tax depreciation write-offs ea..
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