Reference no: EM132895549
Question - You are considering an investment in 30-year bonds issued by a corporation. The bonds have no special covenants.
The Wall Street Journal reports that 1-year T-bills are currently earning 6.00 percent. Your broker has determined the following information about economic activity and the corporation bonds:
Real interest rate = 4.50%
Default risk premium = 3.25%
Liquidity risk premium = 1.75%
Maturity risk premium = 3.00%
What is the fair interest rate on the corporation's 30-year bonds?
A corporation's 10-year bonds are currently yielding a return of 9.25 percent. The expected inflation premium is 1.75 percent annually and the real interest rate is expected to be 2.50 percent annually over the next 10 years. The liquidity risk premium on the corporation's bonds is 0.25 percent. The maturity risk premium is 0.25 percent on two-year securities and increases by 0.25 percent for each additional year to maturity. What is the default risk premium on the corporation's 10-year bonds?
A corporate bond with a 5 percent coupon has 10 years left to maturity. It has a credit rating of BBB and a yield to maturity of 8.0 percent. Recently, the firm has gotten into some trouble and the rating agency is downgrading the firm's bonds to BB. The new appropriate discount rate will be 9 percent. What will be the change in the bond's price, in dollars? Assume interest payments are paid semi-annually and par value is $1,000.
|
Project assessment methods the organization
: Explain the project assessment methods the organization should have used to assess these projects (IRR, NPV, payback, and ARR).
|
|
Compare nike features-package
: Compare Nike's features, package, competitor's prices, promotion, advertising methods, etc with Lululemon.
|
|
Why scarcity is central to economic decision making
: Define economics, and explain why scarcity is central to economic decision making.
|
|
Present return on equity
: Think about how you would present return on equity (ROE) and earnings per share (EPS) to a group of investors or senior management.
|
|
What will be the change in the bond price
: What will be the change in the bond's price, in dollars? Assume interest payments are paid semi-annually and par value is $1,000
|
|
Formulate the most suitable strategy for the organization
: How can we make sure that we formulate the most suitable strategy for the organization?
|
|
The thompson company
: Ms. Thompson, I'd like to show you how Hercules shelving can save you both time and money. Ms. Thompson, how would you like to double your storage space?
|
|
Expected return for the portfolio
: Be sure to discuss risk, the Expected return for the portfolio, and how that compares with the actual returns.
|
|
Why do links send signals of trust to search engines
: Why do you think misspellings are important to consider when building keyword lists
|