4. Your uncle has had a standard 30-year FRM with a 5% interest rate for 2 years (24 months); the original principal was $200,000. One day he calls you up, very excitedly: “My bank offered to refinance my mortgage to a new 30-year ARM with a 2.5% interest rate. This is awesome – since the interest rate is cut in half, my monthly payment will also be cut in half!”

A. Is the second part of his statement correct? By how much does his payment go down? In addition to showing a calculation, please try to briefly explain intuitively what is going on.

B. How would your answer to part (a) change if your uncle had had his old mortgage for 20 years (240 months) instead?

C. How would your answer to part (a) change if the new mortgage has an initial interest only period?

Consider a competitive oil market where a producer faces costs to get the oil out of the ground. Suppose that it costs $10 dollars per barrel to extract oil from the ground. Let ?? denote the price of oil in period ? and let r be the interest rate. a. If a firm extracts a barrel of oil in period ?, how much profit does it earn that period? b. If a firm extracts a barrel of oil in period ? + 1, how much profit does it earn in period ? + 1? c. What is the present value of the profits from extracting a barrel of oil in period ? + 1? What about period ?? d. If the firm is willing to supply oil in each of the two periods, what must be true about the relation between the present value of profits from sale of a barrel of oil in the two periods? Express this in an equation. Explain how this relates to the no-arbitrage condition.

G Corporation is estimating its WACC. Its target capital structure is 20% debt, 20% preferred stock, and 60% common equity. Its bonds have a 10% coupon, paid semiannually, a current maturity of 20 years, and sell for $850. The firm could sell, at par, $100 preferred stock which pays a 12% annual dividend. Greshak's beta is 1.2, the risk-free rate is 10%, and the market risk premium is 5%. The firm's marginal tax rate is 40%. What is the company’s WACC component cost of equity (r_s)?

Please show all work

6.   Murphy Manufacturing has just issued a 15-year, 12% coupon interest rate, $1,000-par bond that pays interest annually. The required return is currently 11%, and the company is certain it will remain at 11% until the bond matures in 15 years.

1. Assuming that the required return does remain at 11% until maturity, find the value of the bond with (1) 15 years, (2) 12 years, (3) 9 years, (4) 6 years, (5) 3 years, and (6) 1 year to maturity.
2. Plot your findings on a set of “time to maturity (x axis) – market value of bond (y axis).
3. All else remaining the same, when the required return differs from the coupon interest rate and is assumed to be constant to maturity, what happens to the bond value as time moves toward maturity? Explain in light of the graph in part b.

kwesa corporation has a premium bond making semiannual payments . the bond pays a 9% coupon, has a YTM of 7%, and has 13 years to maturity. the modigliani company has a discount bond making semiannual payments. This bond pays 7%coupon, has YTM of 9%, and also has 13 years to maturity. if interest rate remain unchanged, what do you expect the price of these bonds to be?

i) a year from now

ii) in 3 years

iii) in 8 years

iv) in 12 years

whats going on here

d. One of the distinguishing features of international finance is exchange rate. Would you prefer a weaker U.S. dollar or a strong U.S. dollar?

100 words or less

Explain in a paragraph, There is speculation that the U.S. will experience higher relative inflation rates over the following 24 months or longer. Explain fully how this would influence the USD in foreign exchange markets. Would the dollar be stronger?

Expansion versus replacement cash flows   Tesla Systems has estimated the cash flows over the​ 5-year lives for two​ projects, A and B. These cash flows are summarized in the following table.  ​(Click on the icon located on the​ top-right corner of the data table below in order to copy its contents into a​ spreadsheet.)

​*After-tax cash inflow expected from liquidation.

a. If Project​ A, which requires an initial investment of −$4,652,000​, is a replacement for Project B and the $1,543,000 initial investment shown for Project B is the​ after-tax cash inflow expected from liquidating​ it, what would be the net cash flows for this replacement​ decision?

b. How can an expansion decision such as project A be viewed as a special form of a replacement​ decision? Explain.

1. Carol sold her personal residence to Mike for $300,000. Before the sale, Carol paid the real estate taxes of $8,000 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $5,000 to Carol and $3,000 to Mike.
   

a. What is Mike’s basis in the residence?

b. What is Carol’s amount realized from the sale of the residence?

c. What amount of real estate taxes can Mike deduct?

d. What amount of real estate taxes can Carol deduct?

do analysis with this table, and give an advice to make business better

1. For calendar year 2017, Thurston and Eunice Howell (ages 59 and 60) file a joint return reflecting AGI of $280,000. They incur the following expenditures:
   

What is the amount of itemized deductions the Thurstons may claim?

Your friend promises you an investing opportunity that she claims has no risk but will provide a guaranteed 20% annual return. (Note: U.S. Treasuries are providing a return of 2%.) What should you do? Group of answer choices Split the difference: put half of your investment in your friend's investing opportunity and half in U.S. Treasuries. This is possible but you should at least check out your friend's track record and if there are investors who have been receiving 20% return anually, go ahead and invest. Don't invest. This sounds like a scam because it is not consistent with the relation between risk and return. This sounds like a sweet deal. Invest $100,000 with your friend.

In 2017, there is a move to repeal the estate and gift tax. This tax, which impacts families with asset transfers exceeding $22 Million, impact few families in the U.S. discuss why so many people, who are not even impacted by this tax, strongly oppose it. Provide an example from your research on a case (different from your peers) regarding death or gift taxes and provide an analysis of the outcome of the case.

explain difference between Operating and Terminal Cash Flow 250 words