Assume that an investor is looking at two​ bonds: Bond A is a 10​-year, 12​% ​(semiannual pay) bond that is priced to yield 13.5 %. Bond B is a 10​-year, 11​% ​(annual pay) bond that is priced to yield 10.5​%. Both bonds carry 5​-year call deferments and call prices​ (in 5 ​years) of ​$1,075.

a. Which bond has the higher current​ yield?

b. Which bond has the higher​ YTM?

c. Which bond has the higher​ YTC?

Foto Company makes 12,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:

An outside supplier has offered to sell the company all of these parts it needs for $41.90 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $52,800 per year.

If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $5.60 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.

Required:

a. How much of the unit product cost of $46.30 is relevant in the decision of whether to make or buy the part? (Round "Per Unit" to 2 decimal places.)

b. What is the financial advantage (disadvantage) of purchasing the part rather than making it?

c. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 12,000 units required each year? (Round "Per Unit" to 2 decimal places.)

Suppose the following are national accounts data for a given year for a fictitious country:
$B AUD
Consumption of fixed capital ………………………………………………. 320
Gross private fixed capital formation……………………………………….. 785
Government consumption expenditure………………………………………. 585
Government investment expenditure………………………………………… 210
Imports of goods and services………………………………………………...565
Exports of goods and services………………………………………………...690
Household consumption expenditure………………………………………..3115
Net property and other income paid overseas………………………………….34
Returns to labour…………………………………………………………….2651
Firm profits………………………………………………………………….1687
Other factor rentals……………………………………………………………482
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(f) Calculate Gross National Product (GNP);
(g) Calculate Net National Product (NNP);
(h) Calculate Current Account Balance (CAB);
(i) Calculate Gross National Savings (GNS)

Suppose the following are national accounts data for a given year for a fictitious country:
$B AUD
Consumption of fixed capital ………………………………………………. 320
Gross private fixed capital formation……………………………………….. 785
Government consumption expenditure………………………………………. 585
Government investment expenditure………………………………………… 210
Imports of goods and services………………………………………………...565
Exports of goods and services………………………………………………...690
Household consumption expenditure………………………………………..3115
Net property and other income paid overseas………………………………….34
Returns to labour…………………………………………………………….2651
Firm profits………………………………………………………………….1687
Other factor rentals……………………………………………………………482
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(j) Suppose that tax revenues are $17 billion for the fiscal year, then what is the value of national savings?
(k) If MPCd remains at 0.63 and GDP changes to $4873 billion; then what will the new level of domestic consumption (i.e. Cdf) be?
(l) If exports then increase by $4 billion, private sector investment decreases by $3 billion; and government consumption and investment decrease and increase by $3 billion and $4 billion respectively: by how much will GDP change and what will be its new value?

Consider a project with a 4-year life. The initial cost to set up the project is $1,200,000. This amount is to be linearly depreciated to zero over the life of the project. You expect to sell the equipment for $240,000 after 4 years. The project requires an initial investment in net working capital of $120,000, which will be recouped at the end of the project.

You estimated sales of 77,000 units per year at a price of $137 each. The variable cost per unit is estimated to be $109.6 and fixed costs are $240,000 per year.

You expect unit sales, prices, variable and fixed costs to be within 15% of your estimates.

The required return is 16% and the tax rate is 34%.

The expected return of stock A is 20% per year and the stock's annual standard deviation is 45%. There is also a risk-free asset. When a complete portfolio is formed with a portfolio weight on the risky asset of 35%, the expected return on the complete portfolio is 8.0%.

(a) Compute the risk-free rate of return.

(b) Compute the annual standard deviation of the complete portfolio above

(c) Compute the market price of risk (i.e., the Sharpe ratio)?

In the current tax year, suppose that 3% of the millions of individual tax returns have errors or are fraudulent. Although these errors are often well concealed, let’s suppose that a through IRS audit (done by you of course) will uncover them. If a random 100 tax returns are audited what is the probability that the IRS will uncover at most 4 fraudulent returns? Create an Excel spreadsheet that may give you an idea about this probability. Hint: Use the RAND() function for every tax return. The RAND() function generates a random number between 0 and 1. If the RAND() function gives you a number that is less than or equal to 0.03 then you can assume that the return contains error. Otherwise you can assume that the return does not contain any error. You can press F9 on your keyboard to regenerate a new instance. You may have to create enough instances to come up with a good approximation of the probability value. You can also find the exact probability using Binomial Distribution. What does it mean if an IRS auditor uncovers no more than 3 fraudulent/erroneous returns for every 100 tax returns?

Please in Excel.

You invest in $200 in the US stock market. If you hold it for one year, there is a 35% chance that your investment value will increase to $250, a 35% chance it will remain at $200, and a 30% chance it will decrease to $180

What is the mean annual return of the investment?

What is the annual return variance?

What is the annual return standard deviation?

Ethical Dilemma . Earlier this year, you were elected to the board of directors of Champion International, Inc. Champion has offered its employees post-retirement health care benefits for 35 years. The practice of extending health care benefits to retirees began modestly. Most employees retired after age 65, when most benefits were covered by Medicare. Costs also were lower because life expectancies were shorter and medical care was less expensive. Because costs were so low, little attention was paid to accounting for these benefits. The company simply recorded an expense when benefits were provided to retirees. The FASB changed all that. Now, the obligation for these benefits must be anticipated and reported in the annual report. Worse yet, the magnitude of the obligation has grown enormously, almost unnoticed. Health care costs have soared in recent years. Medical technology and other factors have extended life expectancies. Of course, the value to employees of this benefit has grown parallel to the growth of the burden to the company.

Without being required to anticipate future costs, many within Champion’s management were caught by surprise at the enormity of the company’s obligation. Equally disconcerting was the fact that such a huge liability now must be exposed to public view. Now you find that several board members are urging the dismantling of the postretirement plan altogether.

Required: Discuss whether the obligation to reduce the company's debt and employment expenses is greater than the obligation to employees to provide postretirement health benefits as a part of deferred compensation.