The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 9 percent for $1,040. The bond has 18 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected rate of return % b1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Bond price $ b2. What is the HPY on your investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) HPY %

A 5-year Treasury bond has a 4.4% yield. A 10-year Treasury bond yields 6.9%, and a 10-year corporate bond yields 8.5%. The market expects that inflation will average 3% over the next 10 years (IP10 = 3%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP = LP = 0.) A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.What is the yield on this 5-year corporate bond? Round your answer to two decimal places

Write an IPS (Investment Policy Statement for yourself. Please state your investment goals (return and risk) and constraints (time, tax, liquidity, law and uniqueness

can you detail explain how solved: "is just to practice" and make sure I have same answer

You are deputy chief of the Space Federation Force (SFF), which means you do whatever the chief of the SFF says. She says you evaluate at 10% per year unless told otherwise.

Space Fuel Inc. is considering establishing a new propellant depot to provide space vehicles a refueling point in their trek to Mars. If placed in a LaGrange point, the depot could save $50,000K annually. The depot can be constructed for $200,000K today and will be used for a period of 10 years. It has a salvage value of $10,000K at the end of its useful life. The new depot will require an annual maintenance cost of $9,000K. Capital financing is available at _6__% per quater compounded <any value>

Q3.   Prepare a statement of cash flows from the following list of items.

A stock price is currently $200. Over each of the next two six-month periods it is expected to go up by 10% or down by 10%. The risk-free interest rate is 6% per annum with continuous compounding. What is the value of a one-year European call option with a strike price of $200?

How do bond ratings and interest rate spreads on bonds differ? Which measure is considered by many investors to be a more comprehensive measure of risk? Why?

Assume that security returns are generated by the single-index model, Ri = αi + βiRM + ei where Ri is the excess return for security i and RM is the market’s excess return. The risk-free rate is 2%. Suppose also that there are three securities A, B, and C, characterized by the following data: Security βi E(Ri) σ(ei) A 0.8 10 % 25 % B 1.0 12 10 C 1.2 14 20 a. If σM = 20%, calculate the variance of returns of securities A, B, and C. (Do not round intermediate calculations. Round your answers to the nearest whole number.) b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C? (Enter the variance answers as a percent squared and mean as a percentage. Do not round intermediate calculations. Round your answers to the nearest whole number.)

Last year Carson Industries issued a 10-year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,060 and it sells for $1,150.

1. What are the bond's nominal yield to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places.

   YTM:   %

   YTC:   %

   Would an investor be more likely to earn the YTM or the YTC?

   -Select-Since the YTM is above the YTC, the bond is likely to be called.Since the YTC is above the YTM, the bond is likely to be called.Since the YTM is above the YTC, the bond is not likely to be called.Since the YTC is above the YTM, the bond is not likely to be called.Since the coupon rate on the bond has declined, the bond is not likely to be called.Item 3

2. What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Round your answer to two decimal places.

     %

   Is this yield affected by whether the bond is likely to be called?

   1. If the bond is called, the capital gains yield will remain the same but the current yield will be different.
   2. If the bond is called, the current yield and the capital gains yield will both be different.
   3. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different.
   4. If the bond is called, the current yield will remain the same but the capital gains yield will be different.
   5. If the bond is called, the current yield and the capital gains yield will remain the same.

   -Select-IIIIIIIVVItem 5

3. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calculation, if required. Negative value should be indicated by a minus sign. Round your answer to two decimal places.

     %

   Is this yield dependent on whether the bond is expected to be called?
   1. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called.
   2. If the bond is expected to be called, the appropriate expected total return is the YTM.
   3. If the bond is not expected to be called, the appropriate expected total return is the YTC.
   4. If the bond is expected to be called, the appropriate expected total return will not change.
   5. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called.

Calculate the value of a stock with the following expectations for dividend payments: $1.75 in Year 1, $2.00 in Year 2, and then annual dividend growth of 1.5% per year indefinitely. Assume a discount rate of 9%. Solve the problem two different ways: first by using the algebraic formula for the Gordon Growth Model combined with PV of uneven dividend payments, then by using Excel to calculate and sum the dividends and their respective present values for the next 150 years. hint: Use the Uneven, then Const. Growth Dividend

1. Net Present Value MethodA series of equal net cash flows at fixed time intervals.—Annuity

   Briggs Excavation Company is planning an investment of $611,700 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for eight years. Customers will be charged $150 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $39 per hour of bulldozer operation.

   Present Value of an Annuity of $1 at Compound Interest
   Year	6%	10%	12%	15%	20%
   1	0.943	0.909	0.893	0.870	0.833
   2	1.833	1.736	1.690	1.626	1.528
   3	2.673	2.487	2.402	2.283	2.106
   4	3.465	3.170	3.037	2.855	2.589
   5	4.212	3.791	3.605	3.353	2.991
   6	4.917	4.355	4.111	3.785	3.326
   7	5.582	4.868	4.564	4.160	3.605
   8	6.210	5.335	4.968	4.487	3.837
   9	6.802	5.759	5.328	4.772	4.031
   10	7.360	6.145	5.650	5.019	4.192

   a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows.

   Briggs Excavation Company
   Equal Annual Net Cash Flows
   Cash inflows:
   Hours of operation Fuel and labor costs per year Hours of operation Maintenance costs per year Total fuel and labor costs per hour
   Revenue per hour Fuel and labor costs per year Fuel cost per hour Labor cost per hour Revenue per hour		X $
   Revenue per year Fuel and labor costs per year Fuel cost per hour Labor cost per hour Revenue per year			$
   Cash outflows:
   Hours of operation Fuel and labor costs per year Hours of operation Maintenance costs per year Total fuel and labor costs per hour
   Fuel cost per hour Annual net cash flows Fuel cost per hour Revenue per year Revenue per hour	$
   Labor cost per hour Annual net cash flows Labor cost per hour Revenue per year Revenue per hour
   Total fuel and labor costs per hour Annual net cash flows Total fuel and labor costs per hour Revenue per year Revenue per hour		X $
   Fuel and labor costs per year Annual net cash flows Fuel and labor costs per year Revenue per year Revenue per hour
   Maintenance costs per year Annual net cash flows Maintenance costs per year Revenue per year Revenue per hour
   Annual net cash flows Annual net cash flows Hours of operation Revenue per year Revenue per hour			$

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   b. Determine the net present value of the investment, assuming that the desired rate of return is 15%. Use the The sum of the present values of a series of equal “Net cash flows” to be received at fixed time intervals.present value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.

   Present value of annual net cash flows	$
   Amount to be invested	$
   Net present value	$

   c. Should Briggs Excavation invest in the bulldozer, based on this analysis?
   

   • Yes
   • No
   , because the bulldozer cost is
   • less than
   • more than
   the present value of the cash flows at the minimum desired rate of return of 15%.

   d. Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round interim calculations and final answer to the nearest whole number.
   hours

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   b. Multiply the annual net cash flow by the present value of an annuity factor and subtract the amount to be invested.

   c. Which is more favorable?

   d. Set up an equation to solve for hours.

   Learning Objective 3.

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The Company expects its dividends to be $85,000 every other year forever, with the first payment occurring two years from today. The firm can borrow at an EAR of 11%, currently has no debt, and has an effective annual cost of equity of 18%. The corporate tax rate is 35%. Assume tax credits for losses and no financial distress costs.

(a) Calculate the value of the firm. Explain the answer.

(b) What will firm value be if it borrows $60,000 in permanent debt with annual coupon payments and uses the proceeds to repurchase its shares?

Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 85; and it currently pays on the 5^th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in year for your calculations.

1. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent.
   $
2. 
   
3. What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places.
   %
4. 
   
5. What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places.
   %
6. 
   
7. If the company could get the funds from a bank at a rate of 7%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your answer to two decimal places.
   %
8. Should Lancaster use bank debt or additional trade credit?
   -Select-Bank debtAdditional trade creditItem 5