David Palmer identified the following bonds for investment: 1) Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025. 2) Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. 3) Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. The three bonds were issued on July 1, 2011. (Each Part is Independent)

(a) If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR), calculate the market price of Bond A on July 1, 2011. [Note: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.]

(b) David purchased the Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (from another investment account), calculate the current yield, capital gain yield and the 2-year total rate of return (HPY) on investment for David on January 1, 2016. [Hint: Be careful with how many rounds of coupons has David received during the holding period and thus how much interests (coupons and reinvestment of coupons) he has earned in total during the 2-year holding period.]

(c) David purchased Bond B on a coupon payment day. Bond B is priced to have a yield to maturity (EAR) of 12.36% and its market value is $1,101,058.953 on the date of purchase. Find the remaining life until maturity (in terms of 6-month period or year) of Bond B.

Hardrock Mining Corporation has seven million shares of common stock outstanding, and 100,000 8-percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $32.60 per share and has a beta of 1.3. The bonds have 15 years to maturity and sell for 93.1 percent of par. The market risk premium is 6.5 percent, 10-year Treasury bonds are yielding 4.7 percent, and HardrockMining’s tax rate is 34 percent. If HardrockMining is evaluating a new investment project that is slightly riskier than the firm’s typical projectand would require adding a subjective premium of 4%, what WACC should the firm use to discount the project’s cash flows? PLEASE SHOW STEP BY STEP WORK

Discuss the individual ways of financing healthcare.

Question 1) A one bedroom unit in Darwin can be purchased now for $160,000 cash, or an $80,000 cash deposit today and $110,000 cash payable in five years. If interest rates are 9% p.a. compounding monthly, which method of payment is better? Explain.

Question 5 (25 marks / Risk, Return and CAPM) (Each of the following parts is independent.) (a) According to the Capital Asset Pricing theory, what return would be required by an investor whose portfolio is made up of 40% of the market portfolio (m) and 60% of Treasury bills (i.e. risk-free asset)? Assume the risk-free rate is 3% and the market risk premium is 7%? ​​​​ (b) You are considering investing in the following two stocks. The risk-free rate is 7 percent and the market risk premium is 8 percent. Stock Price Today Expected Price in 1 year Expected Dividend in 1 year Beta X $20 $22 $2.00 1.0 Y $30 $32 $1.78 0.9 i) Compute the expected and required return (using CAPM) on each stock. ii) Which asset is worth investing? Support your answer with calculations. (c) Which pair of stocks used to form a 2-asset portfolio would have the greatest diversification effect for the portfolio? Briefly explain. Correlation Stocks A & B -0.66 Stocks A & C -0.42 Stocks A & D 0 Stocks A & E 0.75 ​​​​​​​​​​​ (d)​Explain the terms systematic risk and unsystematic risk and their importance in determining ​investment return.​​​​​​

How did the corporate credit unions perform during the financial crisis? Write 200 words.

Please write in your own words. Thank You!

Question 3 (25 marks/Equity Valuation) Mr. Fox Mulder plans to invest in the shares of a high-tech company, Satellite Building Inc (SBI). SBI has just paid a dividend of $30 per share and the management has indicated that it will increase the dividend payments by 20% per year for the next three years, and 10% per year thereafter. SBI has a beta of 1.5. The long-term risk-free interest rate is 4% and the expected market return is 9%. (a)​Based on Capital asset Pricing Model (CAPM), compute the required rate of return on SBI ​shares. [Hint: Refer to the notes for the topic Risk, Return and CAPM.]​​ (b)​Using the answer in (a), calculate the market value per share of SBI. How much should Mr. Mulder pay for 100 shares?​​​ ​ ​​​​ (c)​If Mr. Mulder decides to sell all of SBI shares after 4 years, ​(i)​how much will he expect to get by selling the shares?​​​​ ​(ii)​how much will he have in total? Assume that the dividends are reinvested at the required rate of return calculated in (a).​​​ ​​​​

Eastern Markets has no debt outstanding and a total market value of $154,000. Earnings before interest and

taxes, EBIT, are projected to be $12,000 if economic conditions are normal. If there is strong expansion in the

economy, then EBIT will be 27 percent higher. If there is a recession, then EBIT will be 55 percent lower. The

firm is considering a $20,000 debt issue with an interest rate of 6.5 percent. The proceeds will be used to

repurchase shares of stock. There are currently 2,000 shares outstanding. Ignore taxes. What will be the

percentage change in EPS if the economy enters a recessionary period?

A) -62 percent

B) -55 percent

C)-58 percent

D) -71 percent

E) -46 percent

Liquidation

Southwestern Wear Inc. has the following balance sheet:

The trustee's costs total $234,750, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.5 million is received from sale of the assets? Round your answers for monetary values to the nearest dollar and for percentage values to the nearest whole number. If your answer is zero, enter “0”. Enter your answers as positive values.

Distribution of proceeds on liquidation:

Distribution to general creditors:

Round your answer for monetary value to the nearest dollar and for percentage value to two decimal places.

The remaining $   will go to the common stockholders. They will receive only   % of the amount of equity on the balance sheet.

What is the primary duty of a business? When examining the rights and needs of current holders, should a business focus on the short-term or long-term?

1. How has the rapid pace of technological and financial innovation affected the financial aspects of running a global business enterprise?

GTB, Inc. has a 21 percent tax rate and has $85,416,000 in assets, currently financed entirely with equity. Equity is worth $6 per share, and book value of equity is equal to market value of equity. Also, let’s assume that the firm’s expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below:

The firm is considering switching to a 25-percent-debt capital structure, and has determined that it would have to pay a 12 percent yield on perpetual debt in either event.

What will be the break-even level of EBIT? (Enter your answer in dollars, not in millions. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.)

It is well-documented that the United States consistently runs sizable current account deficits. What are the long-term risks associated with running current account deficits? If you were able to influence policy decisions in the United States, what policies would you implement to minimize these long-term risks?

A $1,000 par value 10-year bond maturing at par with 8% semiannual coupons is selling for $900 Find the nominal yield rate convertible semiannually, using the "Premium/Discount formula".

(NOTE: The premium/discount formula is: P = C + (Fr - Ci)a_n]i   where P = price, C = redemption value, F = par value, i = yield rate (yield to maturity)

Pam Alvarez and Shawna Jones are senior vice-presidents of Mutual of Whitewater. They are co-directors of the company’s pension fund management division, with Alvarez having responsibility for fixed income securities (primarily bonds) and Jones being responsible for equity investments. A major new client, the Southwestern Municipal Alliance, has request that Mutual of Whitewater present an investment seminar to the mayors of the represented cities, and Alvarez and Jones, who will make the actual presentation, have asked you to help them.

          To illustrate the common stock valuation process, Alvarez and Jones have asked you to analyze the Temp Que Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. Stocks of companies with similar risk as Temp Que are currently yielding 13%. You are to answer the following questions (Show calculations clearly).

1) Suppose Temp Que is expected to experience zero growth during the first 3 years and then to resume its steady-state growth of 6 percent in the fourth year. What is the stock’s value now?

2) Why do stock prices change? Answer the question by using the following example: Suppose the expected D₁ is $2, the growth rate is 5 percent, and R is 10 percent. Using the constant growth model, what is the price? What is the impact on stock price if g is 4 percent or 6 percent? If R is 9 percent or 11 percent?