. Question 6 What is the duration of a 4 year coupon bond with a face value of $1000, a coupon rate of 8% and interest rate is 10%? A. 3.12 B. 3.89 C. 3.56 D. 3.48 Question 7 What is the amount of the annual coupon payment for a bond that has 8 years until maturity, sells for $1,150, and has a yield to maturity of 9.37%? A. 121.17 B. 130.18 C. 108.63 D. 104.97 Question 8 In a year in which common stocks offered an average return of 18% and Treasury bills offered 7%. The risk premium for common stocks was: A. 11% B. 18% C. 3% D. 1% Question 9 An upward shaped Treasury yield curve indicates: A. yields on Treasuries with longer maturities will continue to rise B. all bonds should be selling at a discount rather than premium C. real interest rates will be increasing soon in response to economic recession D. bonds will not return as much as common stocks in a boom
According to the Capital Asset Pricing Model (CAPM), if the expected return on stock ABC is greater than the expected return on stock XYZ then:
| A. |
The beta of stock ABC is greater than the beta of stock XYZ |
|
| B. |
The beta of stock ABC is less than the beta of stock XYZ |
|
| C. |
Not enough information provided |
|
| D. |
The standard deviation of stock ABC is greater than the standard deviation of stock XYZ |
In: Finance
On the basis of the following data for Larson Co. for the year ending December 31 Year 2, and the preceding year ended December 31 Year 1, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. In addition to the balance sheet data, assume that: (Q.10)
| Equipment costing $125,000 was purchased for cash. |
| Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000. |
| The stock was issued for cash. |
| The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000. |
|
Year 2 |
Year 1 |
|
|
Assets |
||
| Cash |
$100,000 |
$78,000 |
| Accounts receivable (net) |
78,000 |
85,000 |
| Inventories |
101,500 |
90,000 |
| Equipment |
410,000 |
370,000 |
| Accumulated depreciation |
(150,000) |
(158,000) |
| Total assets |
$539,500 |
$465,000 |
|
Liabilities and Stockholders' Equity |
||
| Accounts payable (merchandise creditors) |
$58,500 |
$55,000 |
| Cash dividends payable |
5,000 |
4,000 |
| Common stock, $10 par |
200,000 |
170,000 |
| Paid-in capital in excess of par—common stock |
62,000 |
60,000 |
| Retained earnings |
214,000 |
176,000 |
| Total liabilities and stockholders' equity |
$539,500 |
$465,000 |
Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.
| Larson Co. | ||
| Statement of Cash Flows | ||
| For Year Ended December 31, Year 2 | ||
| Cash flows from operating activities: | ||
| $ | ||
| Adjustments to reconcile net income to net cash flow from operating activities: | ||
| Changes in current operating assets and liabilities: | ||
| Net cash flow from operating activities | $ | |
| Cash flows from investing activities: | ||
| $ | ||
| Net cash flow used for investing activities | ||
| Cash flows from financing activities: | ||
| $ | ||
| Net cash flow provided by financing activities: | ||
| $ | ||
| Cash at the beginning of the year | ||
| Cash at the end of the year | $ | |
In: Accounting
Suppose the current stock price is $120 and the stock price in a year can be either $150 or $100. The risk-free rate is 2% per year, compounded annually. Compute the price of a European put option that expires in a year. The strike price is K=$130 (Hint: This is a put option case, not a call option. Be careful when you compute the cash-flow at expiration date. All other calculations should be the same as call option case.)
In: Finance
There is a bond that pays $100 per year interest, with a $1,000 par value. It matures in 15 years. The market required yield to maturity on a comparable bond is 12%. What is the value of the bond? How does the value change if the yield to maturity on a comparable bond increase to 15%? What if it decreases to 8%. Explain the above questions (part b) with the concepts of interest rate risk, premium bonds and discount bonds. Recalculate the answer in b, with the assumption that the bond matures in 5 years (instead of 15 years). Explain the above questions (part d) with the concepts of interest rate risk, premium bonds and discount bonds.
Note: Do Not Use Excel
In: Finance
An investor purchases a stock for $60 and a one-year put for $0.90 with a strike price of $50. He also sells a one-year call for $1.05 with a strike price of $70.
What is the total cost of acquiring this position?
What is the maximum payoff for this position?
What is the maximum profit for this position?
What is the minimum payoff for this position?
What is the minimum profit for this position?
Draw the payoff and profit graphs together with payoff table for this position
|
S<50 |
50 |
70 |
|
|
Stock share |
|||
|
Put@55 |
|||
|
Call@65 |
In: Finance
In a survey of four-year colleges and universities, it was found that
255
offered a liberal arts degree.
110
offered a computer engineering degree.
481
offered a nursing degree.
30
offered a liberal arts degree and a computer engineering degree.
211
offered a liberal arts degree and a nursing degree.
86
offered a computer engineering degree and a nursing degree.
25
offered a liberal arts degree, a computer engineering degree, and a nursing degree.
33
offered none of these degrees.
A. How many four-year colleges and universities were surveyed?
There were
nothing
four-year colleges and universities surveyed.
Of the four-year colleges and universities surveyed, how many offered
B. a
liberal artsliberal arts
degree and a nursing degree, but not a
computer engineeringcomputer engineering
degree?There are
nothing
four-year colleges and universities that offer a
liberal artsliberal arts
degree and a nursing degree, but not a
computer engineeringcomputer engineering
degree.C. a
computer engineeringcomputer engineering
degree, but neither a
liberal artsliberal arts
degree nor a nursing degree?There are
nothing
four-year colleges and universities that offer a
computer engineeringcomputer engineering
degree, but neither a
liberal artsliberal arts
degree nor a nursing degree.
D. a liberal arts degree, a computer engineering degree, and a nursing degree?
There are
nothing
four-year colleges and universities that offer a liberal arts degree, a computer engineering degree, and a nursing degree.
Enter your answer in each of the answer boxes.
In: Statistics and Probability
In: Finance
F- You are working on a bid to build two city parks a year for the next three years. This project requires the purchase of $249,000 of equipment that will be depreciated using straight-line depreciation to a zero book value over the three-year project life. Ignore bonus depreciation. The equipment can be sold at the end of the project for $115,000. You will also need $18,000 in net working capital for the duration of the project. The fixed costs will be $37,000 a year and the variable costs will be $148,000 per park. Your required rate of return is 14 percent and your tax rate is 21 percent. What is the minimal amount you should bid per park? (Round your answer to the nearest $100)
In: Finance
An investor purchases a stock for $60 and a one-year put for $0.70 with a strike price of $55. He also sells a one-year call for $0.75 with a strike price of $65.
What is the total cost of acquiring this position?
What is the maximum payoff for this position?
What is the maximum profit for this position?
What is the minimum payoff for this position?
What is the minimum profit for this position?
Draw the payoff and profit graphs together with payoff table for this position.
|
S<55 |
55<S<65 |
65<S |
|
|
Stock share |
|||
|
Put@55 |
|||
|
Call@65 |
In: Finance
In: Finance