Last year Carson Industries issued a 10-year, 15% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,075 and it sells for $1,180. What is the bond's nominal yield to maturity? What is the bond's nominal yield to call? Would an investor be more likely to earn the YTM or the YTC? What is the current yield? Is this yield affected by whether the bond is likely to be called? What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calcuation, if reqired. Round your answer to two decimal places. Enter a loss percentage, if any, with a minus sign. Is this yield dependent on whether the bond is expected to be called?

Suppose for $1,000 you could buy a 10%, 10-year, annual payment bond or a 10%, 10-year, semiannual payment bond. They are equally risky. Which would you prefer? If $1,000 is the proper price for the semiannual bond, what is the equilibrium price for the annual payment bond?

Consolidated Statement of Income

(in thousands)

The Group, Inc. did not sell any equipment or repay any borrowings during the year ended December 31, Year 2. The company declared and paid dividends in the amount of $3,564 during the year ended December 31, Year 2.

Questions

1. Using the information provided above, compute the net cash flow provided by (used in) operating, investing and financing activities using the indirect method.

2. Prepare a cash flow statement for the year ended December 31, Year 2.

One year ago, ShopFast issued 15-year annual bonds at par. The bonds had a coupon rate of 6.5 percent and had a face value of $1,000. Today, applicable yield to maturity to ShopFast’s bonds is 7%. What was the change in price in ShopFast’s bonds from last year to today?
A) -55.56t

B) 51.94
C) -$43.73
D) 58.71
E) The bond price did not change.

WallStores needs to raise $2.8 million for expansion. The firm wants to raise this money by selling 20-year, zero-coupon bonds with a par value of $1,000. The market yield on similar bonds is 6.49 percent. How many bonds must the company sell to raise the money it needs? Assume annual compounding.
A) 9,847 bonds

B) 11,144 bonds C) 12,800 bonds D) 10,508 bonds E) 11,315 bonds

Consider the following stock price and shares outstanding information.

1. Compute the beginning and ending values for a price-weighted index and a market-value-weighted index. Assume a base value of 100 and Year 1 as the base period. Do not round intermediate calculations. Round your answers to two decimal places.

             PWI_{Year 1}:

             PWI_{Year 2}:

             VWI_{Year 1}:

             VWI_{Year 2}:

2. Compute the percentage change in the value of each index during the year. Do not round intermediate calculations. Round your answers to two decimal places.

   Percentage change in PWI:   %

   Percentage change in VWI:   %

3. Compute the percentage change for an unweighted index assuming $1,000 is invested in each stock. Do not round intermediate calculations. Round your answer to two decimal places.

     %

Last year Carson Industries issued a 10-year, 15% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,075 and it sells for $1,280.

1. What are the bond's nominal yield to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places.

   YTM: %

   YTC: %

   Would an investor be more likely to earn the YTM or the YTC?

• What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Round your answer to two decimal places.

  %

  Is this yield affected by whether the bond is likely to be called?

  1. If the bond is called, the capital gains yield will remain the same but the current yield will be different.
  2. If the bond is called, the current yield and the capital gains yield will both be different.
  3. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different.
  4. If the bond is called, the current yield will remain the same but the capital gains yield will be different.
  5. If the bond is called, the current yield and the capital gains yield will remain the same.
• What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calculation, if required. Negative value should be indicated by a minus sign. Round your answer to two decimal places.

  %

  Is this yield dependent on whether the bond is expected to be called?
  1. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called.
  2. If the bond is expected to be called, the appropriate expected total return is the YTM.
  3. If the bond is not expected to be called, the appropriate expected total return is the YTC.
  4. If the bond is expected to be called, the appropriate expected total return will not change.
  5. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called.

Forten Company, a merchandiser, recently completed its calendar-year 2015 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s income statement and balance sheets follow. FORTEN COMPANY Comparative Balance Sheets December 31, 2015 and 2014 2015 2014 Assets Cash $ 70,944 $ 72,000 Accounts receivable 79,125 61,125 Inventory 259,906 230,800 Prepaid expenses 1,600 2,100 Total current assets 411,575 366,025 Equipment 162,500 120,000 Accum. depreciation—Equipment (53,800) (60,000) Total assets $ 520,275 $ 426,025 Liabilities and Equity Accounts payable $ 58,075 $ 111,200 Short-term notes payable 10,000 6,000 Total current liabilities 68,075 117,200 Long-term notes payable 24,175 43,000 Total liabilities 92,250 160,200 Equity Common stock, $5 par value 167,500 150,000 Paid-in capital in excess of par, common stock 52,500 0 Retained earnings 208,025 115,825 Total liabilities and equity $ 520,275 $ 426,025 FORTEN COMPANY Income Statement For Year Ended December 31, 2015 Sales $ 635,000 Cost of goods sold 306,000 Gross profit 329,000 Operating expenses Depreciation expense $ 20,000 Other expenses 128,300 148,300 Other gains (losses) Loss on sale of equipment (4,500) Income before taxes 176,200 Income taxes expense 31,000 Net income $ 145,200 Additional Information on Year 2015 Transactions a. The loss on the cash sale of equipment was $4,500 (details in b). b. Sold equipment costing $45,800, with accumulated depreciation of $26,200, for $15,100 cash. c. Purchased equipment costing $88,300 by paying $63,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,000 cash by signing a short-term note payable. e. Paid $44,125 cash to reduce the long-term notes payable. f. Issued 3,500 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $53,000. Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Last year Carson Industries issued a 10-year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,060 and it sells for $1,150.

1. What is the bond's nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   What is the bond's nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   Would an investor be more likely to earn the YTM or the YTC?
   -Select-Since the YTC is above the YTM, the bond is not likely to be called.Since the coupon rate on the bond has declined, the bond is not likely to be called.Since the YTM is above the YTC, the bond is likely to be called.Since the YTC is above the YTM, the bond is likely to be called.Since the YTM is above the YTC, the bond is not likely to be called.Item 3
   
2. What is the current yield? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Round your answer to two decimal places.
   %
   
   Is this yield affected by whether the bond is likely to be called?
   1. If the bond is called, the capital gains yield will remain the same but the current yield will be different.
   2. If the bond is called, the current yield and the capital gains yield will both be different.
   3. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different.
   4. If the bond is called, the current yield will remain the same but the capital gains yield will be different.
   5. If the bond is called, the current yield and the capital gains yield will remain the same.
   
   -Select-IIIIIIIVVItem 5
   
3. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calcuation, if reqired. Round your answer to two decimal places. Enter a loss percentage, if any, with a minus sign.
   %
   
   Is this yield dependent on whether the bond is expected to be called?
   1. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called.
   2. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called.
   3. If the bond is expected to be called, the appropriate expected total return is the YTM.
   4. If the bond is not expected to be called, the appropriate expected total return is the YTC.
   5. If the bond is expected to be called, the appropriate expected total return will not change.

Last year, the yield on AAA-rated corporate bonds averaged approximately 5 percent; one year later, the yield on these same bonds had climbed to about 6 percent because the Reserve Bank of Australia increased interest rates during the year. Assume that BHP Billiton Limited issued a 10-year, 5 percent coupon bond one year ago (on 1 January). On the same date, Rio Tinto Limited issued a 20-year, 5 percent coupon bond. Both bonds pay interest annually. Assume that the market rate on similar risk bonds was 5 percent at the time the bonds were issued.

1. Compute the market value of each bond at the time of the issue.
2. Compute the market value of each bond one year after issue if the market yield for similar risk bonds were 6 percent.