(Bond valuation​ relationships) The 18​-year, ​$1 comma 000par value bonds of Waco Industries pay 9percent interest annually. The market price of the bond is ​$885

​,and the​ market's required yield to maturity on a​ comparable-risk bond is 12percent.

a.  Compute the​ bond's yield to maturity.

b.  Determine the value of the bond to you given the​ market's required yield to maturity on a​ comparable-risk bond.

Should you purchase this bond?

The following are monthly percentage price changes for four market indexes.

Compute the following.

1. Average monthly rate of return for each index. Round your answers to five decimal places.

   DJIA:

   S&P 500:

   Russell 2000:

   Nikkei:

2. Standard deviation for each index. Do not round intermediate calculations. Round your answers to four decimal places.

   DJIA:

   S&P 500:

   Russell 2000:

   Nikkei:

3. Covariance between the rates of return for the following indexes. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to six decimal places.

   Covariance (DJIA, S&P 500):

   Covariance (S&P 500, Russell 2000):

   Covariance (S&P 500, Nikkei):

   Covariance (Russell 2000, Nikkei):

4. The correlation coefficients for the same four combinations. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to four decimal places.

   Correlation (DJIA, S&P 500):

   Correlation (S&P 500, Russell 2000):

   Correlation (S&P 500, Nikkei):

   Correlation (Russell 2000, Nikkei):

5. Using the unrounded answers from parts (a), (b), and (d), calculate the expected return and standard deviation of a portfolio consisting of equal parts of (1) the S&P and the Russell 2000 and (2) the S&P and the Nikkei. Do not round intermediate calculations. Round your answers to five decimal places.

   Expected return (S&P 500 and Russell 2000):

   Standard deviation (S&P 500 and Russell 2000):

   Expected return (S&P 500 and Nikkei):

   Standard deviation (S&P 500 and Nikkei):

   Since S&P 500 and Russell 2000 have a strong -Select-(negative positive) Item 21 correlation, meaningful reduction in risk -Select-is not observe dis observed Item 22 if they are combined.

   Since S&P 500 and Nikkei have a strong -Select-(negative positive )Item 23 correlation, meaningful reduction in risk -Select-is not observe dis observedItem 24 if they are combined.

An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 10 years, while Bond S matures in 1 year. Assume that only one more interest payment is to be made on Bond S at its maturity and that 10 more payments are to be made on Bond L. What will the value of the Bond L be if the going interest rate is 6%? Round your answer to the nearest cent. $ What will the value of the Bond S be if the going interest rate is 6%? Round your answer to the nearest cent. $ What will the value of the Bond L be if the going interest rate is 8%? Round your answer to the nearest cent. $ What will the value of the Bond S be if the going interest rate is 8%? Round your answer to the nearest cent. $ What will the value of the Bond L be if the going interest rate is 13%? Round your answer to the nearest cent. $ What will the value of the Bond S be if the going interest rate is 13%? Round your answer to the nearest cent. $ Why does the longer-term bond’s price vary more than the price of the shorter-term bond when interest rates change? Long-term bonds have lower reinvestment rate risk than do short-term bonds. The change in price due to a change in the required rate of return increases as a bond's maturity decreases. Long-term bonds have greater interest rate risk than do short-term bonds. The change in price due to a change in the required rate of return decreases as a bond's maturity increases. Long-term bonds have lower interest rate risk than do short-term bonds.

Examine the role of liquidity in banking. How is liquidity linked to capital/solvency?

“By applying capital to investments with long-term benefits, the company is attempting to produce value. This value is dependent on expected future cash flows as well as on the cost of funds.” Explain this statement with regards to the role of cost of capital in financial management decisions

(Forecasting net income​) In November of each​ year, the CFO of Barker Electronics begins the financial forecasting process to determine the​ firm's projected needs for new financing during the coming year. Barker is a small electronics manufacturing company located in​ Moline, Illinois, which is best known as the home of the John Deere Company. The CFO begins the process with the most recent​ year's income​ statement, projects sales growth for the coming​ year, and then estimates net income and finally the additional earnings he can expect to retain and reinvest in the firm. The​ firm's income statement for 2015​ follows:

The electronics business has been growing rapidly over the past 18 months as the economy​ recovers, and the CFO estimates that sales will expand by 18 percent in the next year. In​ addition, he estimates the following relationships between each of the income statement expense items and​ sales:

Note that for the coming year both depreciation expense and interest expense are projected to remain the same as in 2015.

a. Estimate​ Barker's net income for 2016 and its addition to retained earnings under the assumption that the firm leaves its dividends paid at the 2015 level.

What is the estimate of​ Barker's net income for​ 2016?

b. Reevaluate​ Barker's net income and addition to retained earnings if sales grow at 36 percent over the coming year.​ However, this scenario requires the addition of new plant and equipment in the amount of $110,000​, which increases annual depreciation to $56,000 per​ year, and interest expense rises to $16,000.

Draw a chart to show the relationship between bond yield and bond price.  

Provide a Capital Investment Appraisals (CIA) analysis of the the costs of using debt and equity financing (include definitions).

Also evaluate the criteria used when making financing decisions.

You have a $20,000 balance on your credit card, which has an interest rate of 21% compounded quarterly. How many years will it take you to pay off the balance by making monthly payments of $800?

show alll work of have to isolate t

The Scenario:
After recently graduating from KSU, you begin a career as an product investment analyst with Hormel Foods. As the newest Skippy P.B. analyst, your first assignment is to evaluate the following enterprise.

The Skippy P.B. Fruit Bites machine will initially cost $200,000. Hormel expects to use the machine for 10 years. After 10 years, the machine will be worth $20,000 in today’s prices. The machine will be depreciated using straight‐line depreciation over 8 years and the salvage value for depreciation is $5,000.

Hormel is in the 30% tax bracket and the company requires a 10% real after‐tax return on its investments. You expect inflation to be 3%. There is no investment tax credit associated with the machine. You expect maintenance of the machine to cost $4,000 a year and to increase at the general inflation rate.

1. (4 points) Evaluate the interest rate level used in this problem (i.e., is it high, low, acceptable). Justify your answer with an explanation.

2. (16 points) Using the scenario and interest rate information above, prepare a net present cost (NPC) budget for the machine. A NPC budget only includes the items associated with owning the equipment (purchase, terminal value, depreciation, maintenance in this problem). Calculate the after‐tax and pre‐tax capital recovery charges.

3. (26 points) Hormel Foods will use the machine to produce strawberry and grape Skippy P.B. Fruit

Bites. You project selling 160,000 packets of Skippy P.B. Fruit Bites per year at $3.49 (real dollars) per packet in years 1 and 2. You then expect to sell 190,000 packets for $3.49 (real dollars) per packet in years in years 3‐10. The real operating costs are expected to be as follows:

Variable costs (materials, etc) of $20,000/year for years 1‐10;
Ingredient costs of $50,000/year for years 1‐2 and $60,000/year for years 3‐10; Marketing costs of $50,000/year for years 1‐10;
Labor costs of $60,000/year for years 1‐10 expected to increase at 5% per year; Management cost of $80,000/year for years 1‐10 expected to increase at 7% per year.

Prepare a NPV budget for this investment. Use the information provided here in question #3. Also include the Net Present Cost (NPC) for the machine (that you found as your final answer in question #2) as an item (that is as a line item component) in this NPV budget (this cost should be entered as a negative value in this NPV budget).

1. Sjcam used a penetration pricing strategy to introduce its Legend action camera to compete with the latest GoPro offering. Which of the following conditions would argue for using a penetration pricing strategy when introducing this new camera?

a. A large potential market exists, even at a high price.

b. Technological problems still exist for competitors, prohibiting their entry into the market for at least six months.

c. Increasing volume substantially reduces production costs.

d. Consumers perceive a price-quality relationship.

e. The product is relatively price insensitive (price inelastic).

2. Apple offers its iPhone XS for $999, under the presumption that consumers see the smartphone as priced at “something over $900” rather than “about $1,000.” This is an application of what pricing strategy?

a. prestige pricing

b. below-market pricing

c. odd-even pricing

d. target pricing

e. customary pricing

3. Which of the following would be an example of a variable cost for a hotel like the Marriott Marquis Hotel, which caters to an upscale clientele?

a. the average daily rate paid by women in targeted demographics staying at the hotel

b. cleaning supplies and housekeeping wages

c. the salary of the hotel manager

d. the rent for a parking garage used by employees

e. the price charged for renting a ballroom in the hotel

4. Uber and Lyft customers often complain about the practice of “surge” or “prime-time” pricing used by these companies during periods of peak demand. This is an example of a __________ pricing policy.

a. promotional

b. competitive

c. discount

d. dynamic

e. customer