Why do many mutual funds currently sell 3 different classes of shares? - What are the differences among the three types. - What factors should you consider in choosing one type?

Emma Jones s plain to move this coming summer. She has not yet decided whether she wants to rent or buy a property here in Mississippi. Her monthly budget is $1500 to cover any housing expenses including rent or owners' costs (example: mortgage, hazard insurance, property taxes, and Home Owner Association fees). Estimated the maximum house value she can afford to buy. Assume the mortgage is fixed rate, 30 years maturity, 80% LTV, with no points. The interest rate that she was quoted is 4.8% with monthly payments. The value; the hazard insurance premium is 0.5% per year, and that on average you should consider $50 per month for maintenance.

Determine the required monthly payment for the mortgage and maximum house value she can afford if she buys?

Problem 5-22 Yield to Maturity and Yield to Call Arnot International's bonds have a current market price of $1,350. The bonds have an 12% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = 1,090). What is the yield to maturity? Round your answer to two decimal places. % What is the yield to call if they are called in 5 years? Round your answer to two decimal places. % Which yield might investors expect to earn on these bonds, and why? I. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. II. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. III. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. IV. Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC. The bond's indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?

1.List the three financial system components and their financial functions in an effective financial system.

2.Identify the four main types of financial markets.

3.Describe: a. money markets b. capital markets c. primary markets secondary markets

FNMA has direct holdings of 30-year fixed-rate mortgages financed by three- to five-year agency securities sold to the public.

What kind of interest rate option could FNMA use to limit the interest rate risk? Explain how this would work. Explain how a collar could also be used.

Assume a firm has EBAT of $540,000, and no amortization. It is in a 30 percent tax bracket. a. Compute its cash flow. Cash flow $ b. Assume it has $540,000 in amortization. Recompute its cash flow. Cash flow $ c. How large a cash flow benefit did the amortization provide? Benefit in cash flow $

(Present

value of an uneven stream of

payments​)

You are given three investment alternatives to analyze. The cash flows from these three investments are as​ follows:

What is the present value of each of these three investments if the appropriate discount rate is

8

​percent?

a.  What is the present value of investment A at an annual discount rate of

8

​percent?

Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.31. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and use the proceeds to buy another stock with a beta of 1.35. What would your portfolio's new beta be? Do not round intermediate calculations. Round your answer to two decimal places.

Your firm decides to increase equity by $1,000,000. Which of the following sets of transactions could NOT be appropriate ledger entries?

Increase equity by $1,000,000 and increase long-term assets by $1,000,000

Increase equity by $1,000,000, decrease long-term debt by $500,000, and increase inventory by $500,000

Increase equity by $1,000,000 and increase inventory by $1,000,000

All of these transactions would be appropriate.

Stock X has a 9.5% expected return, a beta coefficient of 0.8, and a 40% standard deviation of expected returns. Stock Y has a 13.0% expected return, a beta coefficient of 1.3, and a 30.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%.

1. Calculate each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations.

   CV_x =

   CV_y =

2. Calculate each stock's required rate of return. Round your answers to two decimal places.

   r_x =  %

   r_y =  %

3. Calculate the required return of a portfolio that has $2,000 invested in Stock X and $5,000 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places.

   r_p =  %

Roger is conducting a biochemical experiment for the next 12

months. In the first month, the expenses are estimated to be

$10,000. As the experiment progresses, the expenses are expected

to increase by

2 percent each month. Roger plans to pay for the

experiment with a government

grant, which is received in four

monthly installments, starting a month after the experiment

completion date. Draw the cash flow diagram for this experiment.

Determine the amount of the monthly installment so that the

installments received are equal in value to the expenses incurred.

Annual nominal interest is 1

0 percent, compounded monthly.

You purchase 18 call option contracts with a strike price of $100 and a premium of $2.85. Assume the stock price at expiration is $112.00.

a. What is your dollar profit? (Do not round intermediate calculations.)

b. What is your dollar profit if the stock price is $97.95? (A negative value should be indicated by a minus sign. Do not round intermediate calculations.)