home / study / business / finance / finance questions and answers / ​(bond valuation​) you own a 15​-year, ​$1 comma 000 par value bond paying 6.5 percent ... Question: ​(Bond valuation​) You own a 15​-year, ​$1 comma 000 par value bond paying 6.5 percent interest a... ​(Bond valuation​) You own a 15​-year, ​$1 comma 000 par value bond paying 6.5 percent interest annually. The market price of the bond is ​$750​, and your required rate of return is 11 percent. a. Compute the​ bond's expected rate of return. b. Determine the value of the bond to​ you, given your required rate of return. c. Should you sell the bond or continue to own​ it? a. What is the expected rate of return of the 15​-year,$1,000 par value bond paying 6.5 percent interest annually if its market price is ​$750?

​(Bond valuation​) You own a 15​-year, ​$1 comma 000 par value bond paying 6.5 percent interest annually. The market price of the bond is ​$750​, and your required rate of return is 11 percent.

a. Compute the​ bond's expected rate of return.

b. Determine the value of the bond to​ you, given your required rate of return.

c. Should you sell the bond or continue to own​ it?

a. What is the expected rate of return of the

15​-year,$1,000 par value bond paying

6.5 percent interest annually if its market price is

​$750?

Assume that Walmart is considering opening a store in Argentina. Argentina is rate BB-, and its dollar-based bonds trade at a default spread of 3% over the US treasury bond rate of 6.5%. The Argentine equity market is 1.8 times more volatile than the Argentine long-term bond market. Walmart has a beta of 0.9 (already relevered to account for the Argentinian tax rate of 35% and Argentinian D/E ratio). The market risk premium in the United States is 5.5%. The firm intends to borrow in Argentina at a local rate of 12% (in pesos) and maintain a debt ratio of 25% for Argentine projects. You can assume that the inflation rate in the United States is 3% whereas it is 9% in Argentina.

(a)     Explain what we mean by “the inflation rate” in the above description.

(b)     Estimate the cost of equity and the cost of capital in dollar terms for the Argentine store.

3. Estimate the cost of equity and capital in peso terms of the Argentine store.

Bob Orleans invested $3,000 and borrowed $3,000 to purchase shares in Verizon Communications. At the time of his investment, Verizon was selling for $16 a share.

a. If Bob paid a commission of $40, how many shares could he buy if he used only his own money and did not use margin?

b.  If Bob paid a commission of $80, how many shares could he buy if he used his $3,000 and borrowed $3,000 on margin to buy Verizon stock?

c. Assume Bob did use margin and paid a commission of $80 to buy his Verizon stock. Also, assume he paid another $80 to sell his stock and sold the stock for $22 a share. How much profit did he make on his Verizon stock investment? (Use the rounded number of shares computed in part b. Round your answer to 2 decimal places.)

Zayas has identified the following two mutually exclusive projects.

a. What is the IRR for each project and if you apply the IRR decision rule which project would you accept

b. If the required return is 11% what is the NPV for each of these projects? Which project would you choose?

If possible, please show formula and do not use excel. Thanks!

(Financial

forecastinglong dash—percent

of

sales​)

Next​ year's sales for Cumberland Mfg. are expected to be ​$22.00 million. Current sales are ​$18

​million, based on current assets of $5.00 million and fixed assets of ​$5.00million. The​ firm's net profit margin is 5 percent after taxes. Cumberland estimates that its current assets will rise in direct proportion to the increase in​ sales, but that its fixed assets will increase by only​ $150,000. Currently, Cumberland has $2.00 million in accounts payable​ (which vary directly with​ sales), ​$1 million in​ long-term debt​ (due in 10​ years), and common equity​ (including​ $4 million in retained​ earnings) totaling ​$7.00 million. Cumberland plans to pay $0.75 million in common stock dividends next year.

a. What are​ Cumberland's total financing needs​ (that is, total​ assets) for the coming​ year?

b. Given the​ firm's projections and dividend payment​ plans, what are its discretionary financing​ needs?

c. Based on your​ projections, and assuming that the​ $150,000 expansion in fixed assets will​ occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of​ financing?

a. What are​ Cumberland's total financing needs​ (taht is, total​ assets) for the coming​ year?

​$nothing

million  ​(Round to two decimal​ places.)

b. Given the​ firm's projections and dividend payment​ plans, what are its discretionary financing​ needs?

​$nothing

million  ​(Round to two decimal​ places.)

c. Based on your​ projections, and assuming that the​ $150,000 expansion in fixed assets will​ occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of​ financing?

​$nothing

million  ​(Round to two decimal​ places.)

What are some derivative products? Illustrate their use as investment vehicles. What are convertible securities? What are the advantages and disadvantages of owning a convertible security?

the property she needed to be sure this property would serve her purposes. So she performed market research and investigated the ability to rezone the property. This was going to take about 8 months to accomplish. To prevent anybody else from purchasing the property prior to completing her due diligence, she secured an option on the property. The option cost her $25,000, but it gave her the exclusive right to buy the property for the next 9 months. The option provides that Porky retains the $25,000 if the option is not exercised. However, if it is exercised, the $25,000 becomes part of the $1,000,000 contract price of the real estate. After completing her due diligence, Jenny decides not to purchase the property. She allows the option to expire. What are the tax consequences? Check as many as are correct.

1-Porky has $25,000 of ordinary income upon receipt of the option money.

2-Porky has $25,000 ordinary income on the date the option expired.

3-Jenny has a $25,000 loss on the date she purchased the option.

4-Jenny has a capital loss of $25,000 when the option expired.

5-None of the above.

You are planning to save for retirement over the next 30 years. To do this, you will invest $700 a month in a stock account and $400 a month in a bond account. The return of the stock account is expected to be 10 percent, and the bond account will pay 6 percent. When you retire, you will combine your money into an account with a 9 percent return. Required: How much can you withdraw each month from your account assuming a 20-year withdrawal period?(Do not round your intermediate calculations.) rev: 09_17_2012 $214,222.69 $18,208.93 $17,851.89 $711,295.81 $17,494.85

1.Syntex Increases. Is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on risk (as measure by the standard deviation ) and return

• How is the cash budget is constructed, and how is it used in working capital management.

Company HDE is expected to pay an interim dividend of $1.00 three months from now and a final dividend of $2.10 one year from now. HDE is then expected to repeat the same pattern every year for the foreseeable future with no growth in dividends. Given that the appropriate effective discount rate is 7.0% p.a., what is the stock price of HDE closest to today? A) $43 B) $44 C) $45 D) $46 E) None of the above

You have just accepted a job offer, which came with a signing bonus of $5,000 to be paid today in your retirement account. Your employer will also contribute an extra $10,000 at the end of each full year (you start work tomorrow!). If this account is expected to earn 10% p.a. compounded semi-annually, which number is closest to the amount of money will you have in that account after five years? (including the payment for that year). A) $59,500 B) $65,500 C) $69,500 D) $72,500 E) None of the above

A bond with 15 years to maturity is paying 6% coupons semi-annually, and the last coupon has just been paid. The face value is $1,000 and the yield to maturity is 8% p.a. What is the price today closest to: A) $827.08 B) $932.95 C) $1,000.00 D) $1,324.32 E) None of the above