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A Treasury bond that matures in 10 years has a yield of 4.5%. A 10-year corporate bond has a yield of 7.5%. Assume that the liquidity premium on the corporate bond is 0.25%. What is the default risk
Your parents will retire in 28 years. They currently have $280,000, and they think they will need $1,250,000 at retirement. What annual interest rate must they earn to reach their goal, assuming the
You hope to buy your dream car four years from now. Today, that car costs $82,500. You expect the price to increase by an average of 4.8 percent per year over the next four years. How much will your
Ambrose Industries stock has an average expected rate of return of 13.6% and a standard deviation of 11.8%. What is the probability the stock will lose money more than 10% in any one year?
A bond currently sells for $1,050, which gives it an YTM of 6%. Suppose that if the yield increases by 25 bps, the price of the bond falls to $1,025. What is the duration of this bond?
How much less could you have deposited last year if you could have earned a fixed rate of 6.5 percent and still have the same amount as you currently will when you retire 38 years from today?
What will be the profit/loss on this position if IBM is selling at $87 on the option maturity date? What if IBM is selling at $95? The call sells at $5.50 and the put sells at $1.55.
The risk-free rate of return is 10%, the required rate of return on the market is 15%, and High-Flyer stock has a beta coefficient of 1.5. If the dividend per share expected during the coming year,
The initial investment will require $96,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project. The company has a margin
Adelson's Electric had beginning long-term debt of $42,511 and ending long-term debt of $48,919. The beginning and ending total debt balances were $84,652 and $78,613, respectively. The interest pai
What is the maximum dividend payout ratio consistent with not requiring external funds for a firm with an ROE of 15% a debt-equity ratio of 25% and annual sales growth objective of 10%? (show work)
What is the required asset turnover for a firm with 10% profit margin, 75% equity and a 60% dividend payout that wishes to grow at 8% without increasing financial laverage? (show work)
In keeping with his reputation, he requires that the first payment be paid today. He also charges you 2 percent interest per month. How much money are you borrowing?
The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of r
If the face value of each bond is $1,000, how many bonds must be issued to net the $75 million? Assume that the firm cannot issue a fraction of a bond.
Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $964.05. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,071.
RAH Inc. is not public ally traded, but the P/E ratios of its 4 closest competitors are 15, 15,3,15,7', and 16.5. RAH's current earnings per share are $ 1.50. They are expected to grow at 6% for the
1. Do you agree with the Bonneau's decision to sell? Why or why not? 2. Why did the buyer's retain Ed as a consultant? 3. Do you see any problem with having the Bonneau's son-in-law become the new c
Determine the current market prices of the following $1,000 bonds if comparable raste is 10% and answer the following questions.
Both Magareit and Frederico expect to earn an average return of 9.5 percent on their savings. At the end of the twenty years, how much less Magareit will have than Frederico?
At the end of the twenty years, how much less Magareit will have than Frederico?
What long position in the stock is necessary to hedge a short call option when the strike price is $32? Give the number of shares purchased as a percentage of the number of options that have been so
How much debt should a firm include in it's finances in order to obtain a sustainable growth rate of 25% while maintaining a 50% dividend payout, a 20% profit margin, and an asset turnover of 2.0?
What is the required asset turnover for a firm with a 10% profit margin, 75% equity and 60% dvidend payout that wishes to grow at 8% without increasing financial leverage?