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Compute the yield to maturity of a $3,500 par value bond with a coupon rate of 7.5% (quarterly payments - that is, four times per year) that matures in 25 years. The bond is currently selling for $
Suggest a forward contract on the stock market index. Determine the false statement. Everything else being constant,
If the expected return on the market portfolio is 14%. What is the equilibrium expected rate of return on Homton's stock according to the Capital Asset Pricing Model?
Suppose that U.S. interest rates rise from 3% to 4% this year. The spot exchange rate quotes at 112.5 JPY/USD and the forward rate for a one-year contract is at 110.5. What is the Japanese interest
The term structure of swap rates is: 1-year, 2.50%; 2-year, 3.00%; 3-year, 3.50%; 4-year, 4.00%; 5-year, 4.50%. The two-year forward swap rate starting in three years is closest to
The yield curve is upward sloping. You have a short T-bond futures position. The following bonds are eligible for delivery:
The preferred stock is now selling for $97 per share. What is the current yield or cost of the preferred stock? (Disregard flotation cost)
Consider a bond with par value of EUR 1,000 and maturity in three years, and that pays a coupon of 5% annually. The spot rate curve is as follows: 1-year, 6%; 2-year, 7%; and 3-year, 8%. The value o
From the time of issuance until the bond matures, which of the following bonds is most likely to exhibit negative convexity?
If the real rate is 1.2%, the inflation premium is 1.6% and the market return is 11.0% what is the required rate of return(Must be 4 decimal places) for a stock with a beta of 1.25?
Lisa Smith, the treasurer of Bank AAA, has $100 million to invest for one year. She has identified three alternative one-year certificates of deposit (CDs), with different compounding periods and an
A five-year corporate bond paying an annual coupon of 8% is sold at a price reflecting a yield to maturity of 6%. One year passes and the interest rates remain unchanged.
Consider a savings account that pays an annual interest rate of 8%. Calculate the amount of time it would take to double your money. Round to the nearest year.
The bond matures in 18 months and the next coupon will be paid 6 months from now. Which number below is closest to the bond's Macaulay duration?
An investor buys a Treasury bill maturing in 1 month for $987. On the maturity date the investor collects $1,000. Calculate effective annual rate (EAR).
A zero-coupon bond with a maturity of 10 years has an annual effective yield of 10%. What is the closest value for its modified duration?
what is the present value of $100 to be received in 3 years if the appropriate interest rate is 10 percent, annual compounding?
Bonumeur SA is a French company that produces strollers for children and is specialized in strollers for twins and triplets for the EU market.
Just after the payment was made at the end of the first year, the continuously compounded spot one-year and two-year LIBOR rates are 8% and 8.5%, respectively. The value of the swap at that time is
You are analyzing two comparable (same credit rating, maturity, liquidity, rate) U.S. callable corporate bonds. The following data is available for the nominal spread over the U.S. Treasury yield cu
Stocks are commonly valued using the Price Earnings (PE) model. Evaluate the usefulness and effectiveness of the price earnings ratios when valuing stock.
A non-dividend-paying stock has a current price of $100 per share. You have just sold a six-month European call option contract on 100 shares of this stock at a strike price of $101 per share.
Draw 3 indiffernce curves in the "Expected Return-Standard Deviation" plane. One for a risk averse individual, one for a risk neutral person.
You have hedged the option exposure by buying 18,000 shares of the underlying. The next day, the stock price falls and the delta of the options falls to 0.54. In order to keep the options hedged, yo
What are the risk premium and expected rate of return on a stock with beta= 1.5? Assume a Treasury bill rate of 6% and a market risk premium of 7%.