Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets (which is equal to its total invested capital) of $385,000. The debt-to-total-capital ratio was 17%, the interest rate on the debt was 7.5%, and the firm's tax rate was 35%. The new CFO wants to see how the ROE would have been affected if the firm had used a 50% debt-to-total-capital ratio. Assume that sales, operating costs, total assets, total invested capital, and the tax rate would not be affected, but the interest rate would rise to 8.0%. By how much would the ROE change in response to the change in the capital structure? Do not round your intermediate calculations.

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.

Exhibit 1
Company Shares   Beginning of year price Dividend per share End of year price

Birch    250 $ 40    $2.45    $39.00
Walnut 150    $ 8.00    $1.05 $8.50

Maple    300    $20.00    none $23.00

Cherry 400    $27.00 $1.25 $ 26.25

Use Exhibit 1. The table shows your stock
positions at the beginning of the year, the
dividends that each stock paid during the
year, and stock prices at the end of the year.
What is your portfolio percentage return? A. less than 5.65 percent
B. more than 5.65 percent but less than
6.10 percent
C. more than 6.10 percent but less than
6.55 percent
D. more than 6.55 percent but less than
7.00 percent
E. more than 7.00 percent

Compare and contrast a 5-year AAA corporate bond with a 5-year Treasury Note. Which would typically offer a higher interest rate? Why? What risk affects both types of bonds?

Current one-year interest rates in Europe is 4 percent, while one-year interest rates in the U.S. is 2 percent. You convert $200,000 to euros and invests them in France. One year later, you convert the euros back to dollars. The current spot rate of the euro is $1.20.

a. According to the IFE, what should the spot rate of the euro in one year be?

b. If the spot rate of the euro in one year is $1.12, what is your percentage return from your investment?

c. If the spot rate of the euro in one year is $1.31, what is your percentage return from your investment?

d. What must the spot rate of the euro be in one year for your strategy to be successful?

Exhibit 1 Company Share Beginning of year price Dividend per share End of year priceSprucer 200 $48.00$ 2.50 $47.00Holly Bush 500$ 9.00$ 1.00$ 9.25 Birchdale 400 $20.00 None $22.00 Oakview 300 $27.00 $1.25 $28.50  

11.Use Exhibit 1. The table shows your stock positions at the beginning of the year, the dividends that each stock paid during the year, and stock prices at the end of the year.What is your portfolio percentage return?

A.less than 7.85 percent

B.more than 7.85 percent but less than 8.10 percent

C.more than 8.10 percent but less than 8.35percent

D.more than 8.35 percent but less than 8.60 percent

E.more than 8.60percent

Golden Corp.'s current year income statement, comparative balance sheets, and additional information follow. 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, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes.

Additional Information on Current Year Transactions

1. Purchased equipment for $56,300 cash.
2. Issued 13,200 shares of common stock for $5 cash per share.
3. Declared and paid $101,000 in cash dividends.

Suppose we observe the three-year Treasury security rate (₁R₃) to be 11 percent, the expected one-year rate next year E(₂r₁) to be 4 percent, and the expected one-year rate the following year E(₃r₁) to be 5 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the one-year Treasury security rate, ₁R₁?

​China's GDP growth target for the 12th​ Five-Year-Plan period​ 2011-2015 is 7 percent a year. This largely symbolic goal​ (China's average growth rate for the past five years was a whopping 11 percent a​ year) shows that the central government wants to fundamentally restructure the economy.

If China reduces its economic growth rate from 11 percent a year to 7​ percent, how many additional years will it take for GDP to​ double?

In what year will​ China's GDP​ quadruple?

When GDP grows at 11 percent a​ year, GDP in China doubles in ___ years.