A. Harrimon Industries bonds have 5 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%. What is the yield to maturity at a current market price of $816? Round your answer to two decimal places. % $1,151? Round your answer to two decimal places. % Would you pay $816 for each bond if you thought that a "fair" market interest rate for such bonds was 13%—that is, if rd = 13%? You would not buy the bond as long as the yield to maturity at this price is greater than your required rate of return. You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return. You would buy the bond as long as the yield to maturity at this price is less than your required rate of return. You would buy the bond as long as the yield to maturity at this price equals your required rate of return.

B.

An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 10% annual coupon. Bond L matures in 19 years, while Bond S matures in 1 year.

1. What will the value of the Bond L be if the going interest rate is 6%, 8%, and 11%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 19 more payments are to be made on Bond L. Round your answers to the nearest cent.

   	6%	8%	11%
   Bond L	$	$	$
   Bond S	$	$	$

2. Why does the longer-term bond’s price vary more than the price of the shorter-term bond when interest rates change?
   1. The change in price due to a change in the required rate of return increases as a bond's maturity decreases.
   2. Long-term bonds have greater interest rate risk than do short-term bonds.
   3. The change in price due to a change in the required rate of return decreases as a bond's maturity increases.
   4. Long-term bonds have lower interest rate risk than do short-term bonds.
   5. Long-term bonds have lower reinvestment rate risk than do short-term bonds.

Consider a project to supply 108 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,745,000 five years ago; if the land were sold today, it would net you $1,820,000 aftertax. The land can be sold for $1,756,000 after taxes in five years. You will need to install $5.75 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project’s five-year life. The equipment can be sold for $745,000 at the end of the project. You will also need $615,000 in initial net working capital for the project, and an additional investment of $58,000 in every year thereafter. Your production costs are .56 cents per stamp, and you have fixed costs of $1,130,000 per year.

If your tax rate is 24 percent and your required return on this project is 10 percent, what bid price should you submit on the contract?

You have shorted 10 shares in a company at $98. The initial margin was 50% and the maintenance margin is 30%. A few days after the transaction, the company paid $0.6 dividends and after another few days, the shares price went to $110. What is your percentage margin? Provide your answer in percent, rounded to two decimals, omitting the % sign.

Mary, age 27, annually invests $1,000 in an IRA starting this year through the year of her 35th birthday, and then never makes another contribution. Sara, age 36, annually invests $1,000 in an IRA through the year of her 65th birthday. If both Mary and Sara can earn 8% on their investments, who will have more in her IRA account when she retires at the end of her 65th year AND approximately how much more will she have in her account?

Please show the calculator steps please

1. Currently the spot exchange rate is $1.50/£ and the three month forward exchange rate is $1.52/£. The three month interest rate is 8.0% per annum in the US and 5.8% per annum in the UK. Assume that you can borrow as much as $1M. or £1M.

1. Is there a covered interest arbitrage opportunity for a US multinational? What is the payoff if they conducted CIA?
2. Is there a covered interest arbitrage opportunity for a UK multinational? What would be their payoff if they conducted CIA?
3. How will the covered interest rate parity be restored?
4. What should have been the “correct” forward exchange rate?

1) You have just purchased a home and taken out a $ 530,000 mortgage. The mortgage has a 30​-year term with monthly payments and an APR of 5.20%.

a. How much will you pay in​ interest, and how much will you pay in​ principal, during the first​ year?

b. How much will you pay in​ interest, and how much will you pay in​ principal, during the 20th year​ (i.e., between 19 and 20 years from​ now)?

2) You need a new car and the dealer has offered you a price of $20,000​, with the following payment​ options: (a) pay cash and receive a $2,000 rebate, or​ (b) pay a $5,000 down payment and finance the rest with a 0% APR loan over 30 months. But having just quit your job and started an MBA​ program, you are in debt and you expect to be in debt for at least the next 2​ ½ years. You plan to use credit cards to pay your​ expenses; luckily you have one with a low​ (fixed) rate of 13.59% APR. Which payment option is best for​ you?

3) The mortgage on your house is five years old. It required monthly payments of $1,450​, had an original term of 30​ years, and had an interest rate of 10% (APR). In the intervening five​ years, interest rates have fallen and so you have decided to refinance — that ​is, you will roll over the outstanding balance into a new mortgage. The new mortgage has a​ 30-year term, requires monthly​ payments, and has an interest rate of 6.625% (APR).

a. What monthly repayments will be required with the new​ loan?

b. If you still want to pay off the mortgage in 25​ years, what monthly payment should you make after you​ refinance?

c. Suppose you are willing to continue making monthly payments of $1,450. How long will it take you to pay off the mortgage after​ refinancing?

d. Suppose you are willing to continue making monthly payments of $1,450 and want to pay off the mortgage in 25 years. How much additional cash can you borrow today as part of the​ refinancing?

4) Your uncle Fred just purchased a new boat. He brags to you about the low 6.9% interest rate​ (APR, monthly​ compounding) he obtained from the dealer. The rate is even lower than the rate he could have obtained on his home equity loan 7.9% ​APR, monthly​ compounding). But if his tax rate is 25% and the interest on the home equity loan is tax​ deductible, which loan is truly​ cheaper?

(a) Investment A for $100,000 is invested at a nominal rate of interest, j, convertible semiannually. After 4 years, it accumulates to 214,358.88.

(b) Investment B for $100,000 is invested at a nominal rate of discount, k, convertible quarterly. After two years, it accumulates to 232,305.73. 2

(c) Investment C for $100,000 is invested at an annual effective rate of interest equal to j in year one and an annual effective rate of discount equal to k in year two. Calculate the value of investment C at the end of two years.

Greta, an elderly investor, has a degree of risk aversion of A = 3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of one-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 8.4% per year, with a SD of 23.4%. The hedge fund risk premium is estimated at 13.4% with a SD of 38.4%. The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual returns on the S&P 500 and the hedge fund in the same year is zero, but Greta is not fully convinced by this claim. What should be Greta’s capital allocation?

Weighted average cost of capital is a long way as to how much earnings a company can achieve through the costs of its projects and ultimately any products that are sold. If you were the financial manager do you have a preference for how the company would be capitalized? Do you believe that awaiting skewed more toward debt would be advantageous or more equity?

We are evaluating a project that costs $670,000, has a life of 5 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 59,000 units per year. Price per unit is $44, variable cost per unit is $25, and fixed costs are $760,000 per year. The tax rate is 23 percent, and we require a 16 percent return on this project. Suppose the projections given for the price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best case and worst case NPV figures.

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 6%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 21 % 28 % Bond fund (B) 12 18 The correlation between the fund returns is 0.09. You require that your portfolio yield an expected return of 13%, and that it be efficient, on the best feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) b. What is the proportion invested in the T-bill fund and each of the two risky funds? (Round your answers to 2 decimal places.)

Why do some managers have difficulties in delegating authority? Why do you think this problem might be more pronounced in small businesses?

You are considering two projects with the following cash flows:

Which one of the following statements is true concerning the two projects given a positive discount rate?

Tim wants to buy an apartment that costs $2,225,000 with an 85% LTV mortgage. Tim got a 30 year, 3/1 ARM with an initial teaser rate of 3.75%. The reset margin on the loan is 300 basis points above 1 year CMT. There are no caps. The index was 1% at the time of origination. Tim also had to pay 1 point for this loan. Suppose the index rate will remain 1% for the life of the loan.

Compute the annualized IRR for this loan assuming Tim will prepay in 5 years.