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Both bond A and bond B have 6.6 percent coupons and are priced at par value. Bond A has 8 years to maturity, while bond B has 15 years to maturity. a. If interest rates suddenly rise by 1.2 percent, what is the percentage change in price of bond A and bond B? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Bond A % Bond B % b. If interest rates suddenly fall by 1.2 percent instead, what would be the percentage change in price of bond A and bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Bond A % Bond B %
Suppose a farmer is expecting that her crop of grapefruit will be ready for harvest and sale as 150,000 pounds of grapefruit juice in 3 months time. She would like to use futures to hedge her risk but unfortunately there are no futures contracts on g..
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $6,300,000, and it would be depreciated straight-line to zero ove..
twin oaks health center has a bond issue outstanding with a coupon rate of 7 percent and four years remaining until
An investor has designed a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20% while the standard deviation on stock B is 30%. The correlation coefficient between the return on A and B is 0.25. If the inve..
Some major companies live and die by EVA. For example, at General Electric, more capital is allotted only to divisions that pass the EVA threshold and divisions that regularly flunk are sold off. It’s a simple, but powerful, approach that looks at a ..
Compute return on equity (ROE) for 2010. (Round your answers to two decimal places. Do not round until your final answer.) 2010 ROE = %
Dylon Corp.'s bonds currently sell for $1,180 and have a par value of $1,000. They pay a $60 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to maturity (YTM)?
Feeback Corporation stock currently sells for $30 per share. The market requires a return of 11.4 percent on the firm's stock. If the company maintains a constant 3.7 percent growth rate in dividends, what was the most recent dividend per share pa..
Consider a 10-year, $1000 coupon bond, redeemable at par, and assume that the coupon is paid continuously with an annual coupon rate of 5%. The bond is said to be callable, if the borrower (the issuer) can redeem the bond at a time prior to the matur..
Overhead is applied on the basis of machine hours. It takes 3 machine hours to produce a large doll house and 2 machine hours to produce a small doll house. EDHC produces 2,000 large doll houses and 10,000 small doll houses in a year. Total manufactu..
Assume that a new project will annually generate revenues of 1,800,000 and cash expenses (including both fixed and variable costs) of 600,000 while increasing depreciation by 190,000 per year. In addition, the firm’s tax rate is 37%. Calculate the op..
A drawback to the historical approach of estimating an asset’s expected return is:
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