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What has been the impact of the recent mortgage crisis on the money supply in the United States? What actions did the Federal Reserve take in response to the mortgage crisis?
A firm is all equity financed, with 10,000 outstanding shares with a market value of $20 each. Its net income was $30,000, and it decides to pay a cash dividend of $2,000. Calculate the value of eac
Ampex common stock has a beta of 1.4. If the risk-free rate is 8 percent, the expected market return is 16 percent, and Ampex has $20 million of 8 percent debt, with a yield to maturity of 12 percen
What is the present value of a growing perpetuity that makes a payment of $100 in the first year, which thereafter grows at 3% per year? Apply a discount rate of 7%.
A $1000 per value convertible bond has a conversion price of $50. It is currently selling for $1,120 despite the fact that the bond's coupon rate and the market rate are equal. The common stock obta
Common stock selling for $3.45 per share has just paid a dividend of $0.29 and is expected to grow by 4% forever. The firm has a beta of 1.3 and the risk free rate on treasury securities is 3%. The
You purchased one of AAA Corp.'s 9%, 15-year convertible bonds at its $1,000 par value a year ago when the company's common stock was selling for $25. Similar bonds without a conversion feature retu
Helena purchases a condo and obtains a $250,000 fully amortizing level payment 15 year mortgage bearing an (annual) interest rate of 6.75%. How much will her monthly blended principal and interest p
Suppose speculator liquidated the contract one month later, when the contract closed at $0.8600. If the initial margin for each Euro contract is USD2,000, what is the annualized return to the specul
Suppose that a stock's price is $48 at the end of Day 1. If the price of the stock increases by 30% during Day 2, 20% during Day 3 and then decreases by 5% during Day 4, what is the total percentage
What types of companies have benefited from this software? What are some of the important functionalities of the BPM products offered?
How many shares must the venture capitalist receive to end up with 20% of the company? What is the implied price per share of this funding round? What will the value of the whole firm be after this
An investor recently purchased a corporate bond which yields 12%. The investor is in the 38% combined federal and state tax bracket. What is the bond's after-tax yield? Round your answer to two deci
Suppose a 30 year bond offers 4% coupon rate paid semiannually. The market price is $1000 equal to the par value. What is the payback period for this bond? What is the discounted payback period?
What are the components of the nominal interest rate? What does each component pay for? (Do the math) What is an investment banker? Why would a company use one? What are the Restrictive Covenants? Why
Calculate the exercise value of the option. Why is an investor willing to pay 50 cents an option when the stock is going for $35? Calculate the exercise value if the price of the stock increases to $4
These bonds make annual payments and mature nine years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7.5 percent. If the inflation rate was 3.2 perc
The company then expects to settle down to a constant-growth rate of 8 percent annually. If the required rate of return is 12 percent, what is the present value of the dividends over the fast growth
Suppose you see a one-year European call option with a strike price of $100. What is the possible range of no-arbitrage call option prices allowed today?
The bank offers you a 15-year mortgage requiring annual end-of-year payments of $3,188 each. The bank also requires you to pay a 3 percent loan origination fee, which will reduce the effective amoun
Next, compare the level of capital spending across the two firms. Point out how the spending was similar and/or different and speculate why the similarities or differences might exist.
Discuss which financial management practices are most effective in creating and monitoring an operating budget. Discuss which financial management practices are least effective in creating and monitor
Find the component costs of debt, preferred stock, retained earnings, and new common stock. How much new capital can be raised before LCI must sell new equity? (In other words, find the retained earni
Determine the special purpose budget for the program. Show revenues and expenses by line item, and show the expected profit or loss. If there is an expected loss, should LH necessarily abandon the p
What lessons for the future can we learn from this mispricing of MBS? What precautionary mechanisms would you suggest to avoid the repetition of this crisis in the future?