The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity.

a. What is the 1-year interest rate?

b. What is the 2-year interest rate?

c. What is the 3-year interest rate?

d. What is the 4-year interest rate?

Consider three bonds with 5.20% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.
a. What will be the price of the 4-year bond if its yield increases to 6.20%?
b. What will be the price of the 8-year bond if its yield increases to 6.20%?
c. What will be the price of the 30-year bond if its yield increases to 6.20%?
d. What will be the price of the 4-year bond if its yield decreases to 4.20%?
e. What will be the price of the 8-year bond if its yield decreases to 4.20%?
f. What will be the price of the 30-year bond if its yield decreases to 4.20%?

1. You have decided to purchase 1,000 shares of Caterpillar and short 600 shares of Home Depot. Complete these transactions on Stock-Trak.

2. Stock Transactions The next day, you decide that you want only 600 shares of Caterpillar and want to short 200 more shares of Home Depot. Complete the necessary transactions.

3. Stock Transactions You have now decided to close your long position in Caterpillar and close out your short position in Home Depot. Complete the necessary transactions. What is your total dollar gain or loss on these transactions?

(use any dollar amount)

1. Able writes to Baker: “I will mow your lawn for $20.” If Baker accepts, is this an express or implied contract?
2. Able telephones Baker: “I will mow your lawn for $20.” Is this an express or implied contract?
3. Carr staples this poster to a utility pole: “$50 reward for the return of my dog, Argon.” Describe this in contractual terms regarding explicitness, mutuality, enforceability, and degree of completion.

IBM just paid a dividend of $1.6 per share. You expect IBM's dividend to grow at a rate of 9%

per year for the next three years, and then you expect constant dividend growth of 4% forever.

Based on the risk of IBM stock, you require a return of 13%. Using the dividend discount model,

what is the value of IBM stock?

Why might a student who is claimed as a dependent on another person's tax filing (e.g. that of their spouse or their parents) be prohibited from taking the student loan interest deduction? If the student is permitted to take the deduction on their tax filing, why might the deductible amount be reduced depending on the student's Modified AGI?

Chapter 3 Homework

You are considering an investment in the common stock of Target (Ticker: TGT). Calculate the missing ratios (Current Ratio, Debt Ratio, and Profit Margin). Discuss the company’s strengths and weakness in the areas of liquidity, asset management, debt management and profitability relative to the competitor, Walmart Inc. (Ticker: WMT). Summarized Financial Data and Ratios from Hoovers.

Target: 2017 Annual Balance Sheet (In Millions)

Target: 2017 Income Statement (In Millions)

Stock C is expected to pay a dividend of $5.80 next year. Thereafter, dividend growth is expected to be 19.00% a year for five years (i.e., years 2 through 6) and zero thereafter.

If the market capitalization rate for each stock is 9.00%, what is the stock price for each of the stock C?

Why is a home a good inflation hedge? Should a home be included as an asset if its occupants aren’t sure they could sell it?

Please discuss the independence of the Fed.

How do you resolve unethical bussiness behavior at a beer distribution company you work at and what would be your recommendations to management to deal with these issues.

The rate of return on Cherry Jalopies, Inc., stock over the last five years was 15 percent, 11 percent, -1 percent, 4 percent, and 13 percent. Over the same period, the return on Straw Construction Company’s stock was 16 percent, 20 percent, -3 percent, 1 percent, and 12 percent.

Calculate the variances and the standard deviations for Cherry and Straw. (Enter variance as a decimal and standard deviation as a percent. Round your variance to 5 decimal places and standard deviation to 2 decimal places. Omit the "%" sign in your response.)

What are the facts involved in Danske Bank's Estonian Branch money laundering activities?

a) Explain the concept of time value of money

b) Distinguish between risk and uncertainty in the context of finance

c) Discuss the objective of working capital management

d) Distinguish between overtrading and overcapiatlisation

e) Distinguish between interest rate risk and currency risk