(400-500 words)

In 2002 New York Times report indicated that Brazil's Amazon-based export industries that are leading to the destruction of environment introduced new environment-oriented foreign aid. Why was Brazil considered, what was the procedures followed, and explain it actual effect?

A $16,000 bond redeemable at par on July 27, 2012 is purchased on October 19, 2002. Interest is 6.9% payable semi-annually and the yield is 7.3% compounded semi-annually.

a. What is the cash price?

b. What is the accrued interest?

c. What is the quoted price?

LIS Corporation, an environmental service provider, had revenues of $209 million in 2002 and reported losses of $3.1 million. It had earnings before interest and taxes of $12.5 million in 2002, and had debt outstanding of $109 million (in market value terms). There are 15.9 million shares outstanding, trading at $11 per share. The pre-tax interest rate on debt owed by the firm is 8.5%, and the stock has a beta of 1.15. The firm's EBIT is expected to increase 10% a year from 2003 to 2006, after which the growth rate is expected to drop to 4% in the long term. Capital expenditures will be offset by depreciation, and working capital needs are negligible. (The corporate tax rate is 40%, and the treasury bond rate is 7%.)

1. Estimate the cost of capital for LIS.

2. Estimate the value of the firm.

3. Estimate the value of equity (both total and on a per share basis).

The following are data on

y = quit rate per 100 employees in manufacturing

x = unemployment rate

The data are for United States and cover the period 1990-2002.

(a) Estimate the regression and report the results

(b) Construct a 95% confidence interval for β.

(c) Test the hypothesis H₀ : β = 0 against the alternative β=0 at the 5% significance level.

(d) Test Normality of the residuals using Jarque-Bera test.

(e) What is likely to be wrong with the assumptions of the classical normal linear model in this case? Discuss.

a) $200,000 U.S. Treasury 7 7/8% bond maturing in 2002 purchased and then settled on October 23, 1992, at a dollar price of 105-20 (this is the clean price) with a yield to maturity of 7.083% with the bond originally being issued at 11/15/1977. Face value per unit is $1,000.

i) Calculate the clean price of the bond issue

ii) Calculate the accrued interest of the bond issue

iii) Calculate the full price of the bond issue

b) $200,000 U.S. Treasury 7 7/8% bond maturing in 2002 purchased and then settled on October 23, 1992, at a dollar price (clean price) with a yield to maturity of 7.083% with the bond originally being issued at 11/15/1977. Calculate the full price (per unit of the bond). Note: On a per unit basis, the answers to(a)and(b)should be the same.Anydifferencemustbe due to rounding error only.

1. An American politician recently said "If inflation is fully anticipated by all parties, the redistributional effects would be almost nothing. It's the fact that some inflation is a surprise that causes there to be winners and losers during an inflationary period." Do you agree with this statement? Is it true that there are no costs of anticipated inflation? Explain the costs associated with expected inflation and the costs associated with unexpected inflation.

2. In 2002, the U.S. CPI was 100. In 2003, the U.S. CPI was 107. If you had $20,000 in your bank account at the beginning of 2002, would you have been better off if you had kept the $20,000 in cash (money), used $20,000 to buy an interest-bearing financial asset paying a nominal interest rate of 6%, or using the $20,000 to buy a real asset (like art or gold)? Explain your answer. (What is the real return on each asset?)

a) $200,000 U.S. Treasury 7 7/8% bond maturing in 2002 purchased and then settled on October 23, 1992, at a dollar price of 105-20 (this is the clean price) with a yield to maturity of 7.083% with the bond originally being issued at 11/15/1977. Face value per unit is $1,000.

i) Calculate the clean price of the bond issue

ii) Calculate the accrued interest of the bond issue

iii) Calculate the full price of the bond issue

b) $200,000 U.S. Treasury 7 7/8% bond maturing in 2002 purchased and then settled on October 23, 1992, at a dollar price (clean price) with a yield to maturity of 7.083% with the bond originally being issued at 11/15/1977.

Calculate the full price (per unit of the bond).

Note: On a per unit basis, the answers to(a)and(b)should be the same.Anydifferencemustbe due to rounding error only.

1. Company A saved 1Billion dollars of internal cash in 2001 and 2002. Their debt to value ratio is around 40% in both 2001 and 2002. In order to finance a project in 2003, which costs 3 billion dollars, the company used 1billion dollar internal cash. The company had 3 billion dollars of internal cash before the project. The company’s cost of debt is the same as the cost of using internal cash. The market value of the company at the end of 2003 is 150 Billion dollars and the market value of equity is 90 billion dollars.

If you were told that the company is following pecking order theory, how would you evaluate the company’s decision in financing the new project?

If you were told that the company is following trade-off theory, how would you evaluate the company’s decision in financing the new project?

a) $200,000 U.S. Treasury 7 7/8% bond maturing in 2002 purchased and then settled on October 23, 1992, at a dollar price of 105-20 (this is the clean price) with a yield to maturity of 7.083% with the bond originally being issued at 11/15/1977. Face value per unit is $1,000.

i) Calculate the clean price of the bond issue

ii) Calculate the accrued interest of the bond issue

iii) Calculate the full price of the bond issue

b) $200,000 U.S. Treasury 7 7/8% bond maturing in 2002 purchased and then settled on October 23, 1992, at a dollar price (clean price) with a yield to maturity of 7.083% with the bond originally being issued at 11/15/1977. Calculate the full price (per unit of the bond). Note: On a per unit basis, the answers to(a)and(b)should be the same.Anydifferencemustbe due to rounding error only.