Get college assignment help at uniessay writers In a particular market where spot rates apply the price at issue of 5-year fixed interest bond bearing 5% per annum interest in arrears and redeemable at 98% is £114 per £100 nominal. Further, it is known that the 5-year spot rate is 6.2% pa and the 1-year forward rate at time t=5 is 6.4% pa. Hence, calculate, to 5 decimal places, the 6-year par yield in this market at time t-0. Answer: 10.31697 X The correct answer is: 3.38581
When housing prices began to decline after their peak in 2006, many subprime borrowers found that their mortgages were “underwater.” This meant that: the value of the house fell below the amount of the mortgage. the basement flooded since they could not afford to fix the leaky plumbing C. A. B. the roof leaked during a rainstorm. the amount that they owed on their mortgage was less than the value of their house D.
A major disruption in financial markets characterized by sharp declines in asset prices and firm failures is called a financial crisis. A. fiscal imbalance. B. free-rider problem “lemons” problem. C. D.
The too-big-to-fail policy: reduces moral hazard problems. puts large banks at a competitive disadvantage in attracting large deposits. C. A. B. treats large depositors of small banks inequitably when compared to depositors of large banks D. allows small banks to take on more risk than large banks.
An insurance company is offering a new policy to its customers. Typically, the policy is bought by a parent or grandparent for a child at the child’s birth. The purchaser (say, the parent) makes the following six payments to the insurance company: 890 First birthday: Second birthday: 890 Third birthday: Fourth birthday: $ 850 Fifth birthday: Sixth birthday: 990 $1,090 950 After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $390,000. The relevant interest rate is 11 percent for the first six years and 7 percent for all subsequent years. Find the future value of the payments at the child’s 65th birthday. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $ 406,784.96
Question (4) Wlt, Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%. What is the firm’s A 13.25% 2 cost of equity? B. 13.89% C. 13.92% D. 14.14% E. 14.25%
Kwok Enterprises has the following income statement. How much after-tax operating income does the firm have? 2. $2,250 Sales Costs 1,400 250 Depreciation $ 600 EBIT Interest expense 70 530 EBT Taxes (40%) 212 $318 Net income 3. Brookman Inc’s latest EPS was $2.75, its book value per share was $22.75, it had 315,000 shares outstanding, and its debt ratio was 44%. How much debt was outstanding 4. Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm’s total-debt-to-total-assets ratio was 45.0%. Based on the DuPont equation, what was the ROE? www.euruni.edu 2
Walmart Compute the company’s net profits and EPS for each of the next three years. Based on P/E ratio, what should be the value of your company’s equity? Number of shares outstanding 6 Million Current stock price $100 Dividends 0 Net Profit 2% As a shareholder, suppose you will receive $2 as dividends in 2020, $2.5 in 2021, and $3 in 2022. After that, the dividend will have a constand growth rate of 2 %. Using the constant growth DVM to place a value of your company’s stock in 2019. Do you recommend buying, selling, or holding this stock? P/E Expected sales in next 1 year Expected sales in next 2 year 20 1000 Million 1200 Million Expected sales in next 3 year 1400 Million As a shareholder, suppose you will $2 as dividend in 2020 and grow at 5 % until 2022. After that, the dividend will have a constand growth rate of 3 %. Walmart Place a value of your company’s stock in 2019. Do case 1 case 2 you recommend buying, selling, or holding this stock? Number of shares outstanding 6 Million 6 Million Current stock price Dividend per share in year 2020 Dividend per share in year 2021 Dividend per share in year 2022 required rate of return constant growth rate after 2021 Stock price in 2019? Overpriced or Underpriced? $100 $100 $2 $2 $2.5 $2 $3 $2 10% 10% 2% 2%
Consider a single-index model structure with 10 risky assets. In other words, E(R;) – aiBiE(RM), i = 1,…,10, where Ri and RM are the excess returns of risky asset i and the market index respectively. Using the regression equation Ri(t) a B;RM(t) ei(t), how many parameters will enable 6. us to prepare the entire input list for this single- index universe? 30 a. b. 22 c. 20 d. 32 12
10 One-year and two-year interest rates are 2% and 3% respectively. Which of the following interpretations is correct? Under the expectations hypothesis, this means investors anticipate one-year rate for the following year. b. Under liquidity preference hypothesis, this means investors anticipate the one-year rate for the following year c. Under liquidity preference hypothesis, this means investors anticipate a decrease of the one-year rate for the following year d. Under liquidity preference hypothesis, this means investors anticipate the same one- year rate for the following year. None of the above. an increase in the a. an increase in e
Get college assignment help at uniessay writers 5. Adams Enterprises’ noncallable bonds currently sell for $1,120. They have a 15-year maturity, an annual coupon of $85, and a par value of $1,000. What is their yield to maturity? 6. Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 5.7%. If the current market interest rate is 7.0%, at what price should the bonds sell? 7. Calculate the required rate of return for Climax Inc, assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0 %, (3) the market risk premium is 5.0%, (4) the firm has a beta of 1.00, and (5) its realized rate of return has averaged 15.0 % over the last 5 years. 8. Bae Inc. is considering an investment that has an expected return of 159% and a standard deviation of 10%. What is the investment’s coefficient of variation?
9. Cornell Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that a project’s projected NPV can be negative, in which case it will be rejected. WACC: 10.00% 3 Year 0 1 2 $460 $470 -$1,050 $450 Cash flows 10. Datta Computer Systems is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s projected IRR can be less than the WACC (and even negative), in which case it will be rejected. 2 3 Year $490 $450 $470 -$1,100 Cash flows 11. Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Lasik decided to accept or reject the project, the Federal Reserve took actions that changed interest rates and therefore the firm’s WACC. The Fed’s action did not affect the forecasted cash flows. By how much did the change in the WACC affect the project’s forecasted NPV? Note that a project’s projected NPV can be negative, in which case it should be rejected.
(b). Assume perfect capital markets. Indicate the influence (Increase, Decrease or Unchanged) of cash dividend, share buyback and share split on share price and the number of shares in the table below (6 marks) Share price Number of shares Cash dividend Share buyback Share split
10. Datta Computer Systems is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s projected IRR can be less than the WACC (and even negative), in which case it will be rejected. C 3 2 0 Year $470 $490 $450 Cash flows -$1,100
The dividend on Bedford Motors ordinary shares will be $0.50 in 1 year and $0.65 in 2 years. You know that you can sell a Bedford Motors share for $9.50 in 2 years and you require a 17% return on your investment. How much would you be willing to currently pay for a Bedford Motors share? nd
A bond with a par value of $1,000 and 9 years to maturity is currently selling for $1093.05 If the nominal yield to maturity is 8.5%, what is this bond’s coupon interest rate? A 10-year, 12% coupon rate debenture is currently selling for $1,029.25. What is its effective yield to maturity?
Question 2: Systems Analysis (25 Marks) You are employed by a company that manufactures luxury pens. The company has two production facilities, one in Sydney and one in Perth. The fixed cost and capacity for each facility are: Location Fixed Cost Сарacity 200,000 units P.A Sydney $1.8M Perth 150,000 units P.A $1.3M Demand in Sydney is 150,000 units per annum. Demand in Perth is 89,000 units per annum. Variable costs per unit are $40 in Sydney, and $30 in Perth. There is a shipping cost of $8 to ship a unit between Sydney and Perth i) (5 marks) a) What is the optimal production quantity at each of the Sydney and Perth facilities? b) What is the amount of profit at the optimal production values if each unit is sold for $130 in Sydney and $150 in Perth. ii (5 marks) Over a 10 day period the number of defects produced in the Perth factory were as follows: 4 10 Day 2 3 5 6 7 Defects 48 66 92 10 45 31 32 68 36 45 a) What are the control limits and on how many days, if any, were the number of defects significant?
A bond of £6,000 nominal is redeemable at 111% on any coupon payment date between 12 and 26 years from the date of isssue. The bond pays coupons of 6.8% per annum quarterly in arrears. Calculate, to 2 decimal places, the with-dividend price one month after issue that should be paid by an investor liable to 16% income tax wishing to achieve an effective annual yield of 2.8%. 139.57 Answer: The correct answer is: 8289.04
A fixed interest stock with an optional redemption date at any time between 14 and 24 years from the date of isssue is redeemable at 111%. It pays coupons of 4.1% per annum in arrears. An investor, subject to 32% income tax and 35% capital gains tax, makes a with-dividend purchase half a year after issue a £9,000 nominal of the bond and obtains a net effective yield of 9.7% per annum. Calculate, to 2 decimal places, the price paid by the investor. 50.33 Answer: The correct answer is: 3283.40
In January 2003, the government of a country issued an index-linked bond redeemable at 110% in exactly 3 years time. Coupons were payable annually in arrears at an annual rate of 4.196. Interest and capital payments were indexed by reference to the value of an inflation index with a time lag of 6 months. An investor liable to income tax and capital gains tax at rates 26% and 37%, respectively, has purchased £9,000 nominal at issue and held it to redemption. The inflation index for the given period was as follows: Inflation indexes 2002- 2006 July Year January 2002 100.5 105.0 2003 108.4 111.4 2004 113.3 115.9 2005 117.7 119.8 125.6 2006 123.0 Calculate the price paid at issue for the bond, given that the investor has achieved an effective money yield of 6.8% per annum from this investment. Answer: 79866.78 X The correct answer is: 9526.22
The current annual rent for an office block is set at a rate of £276 thousands per annum payable 4 monthly in arrears. Under the lease agreement the rent is increased regularly at every 3 years, with the first increase due in exactly 3 years time, at a growth rate of 3.9% per annum compound. Also, the property reverts, for no further payment, to the original owner after 7×3 years. Calculate the present value in thousands, to 5 decimal places, of the future rental income generated by this property based on an effective annual interest rate of 5.6% | Answer: 8567.98 The correct answer is: 4600.32
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