QUESTION The rate of inflation for the coming year is expected to be 3 percent and the rate of inflation in Year 2 and thereafteris respected to remain constant at some level above 3 percent. Assume that the real risk-free rate r* is 2 percent for all maturities and the expectations theory fully explains the […]
Date: September 2nd, 2020
QUESTION The Radek company uses cost-plus pricing with a 30% mark-up. The company is currently selling 80,000 units at $65 per unit. Each unit has a variable cost of $47. In addition, the company incurs $240,000 in fixed costs annually. If demand falls to 40,000 units and the company wants to continue to cha Costs […]
Date: September 2nd, 2020
QUESTION What is the yield to maturity on a 10-year, 9 percent annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does the fact that a bond sells at a discount or at a premium tell you about the relationship between r and the bonds coupon rate?What is the […]
Date: September 2nd, 2020
QUESTION IBIS Corporation has had dividends grow from $2.50 per share to $5.00 per share over the last 10years (the $5.00 per share dividend was paid yesterday; that is, D0 = $5.00). This compounded annualgrowth rate in dividends is expected to continue into the future forever. If the current market price of As it is […]
Date: September 2nd, 2020
QUESTION A Corporation sold an issue of 15 year $1000 par bonds to build new buildings. The bonds pay 6.85% interest, semi-annually. Todays required rate of return is 8.35%. How much should these bonds sell for today rounded to the nearest $1?Please calculate out specifically. I am new to these calculatio According to the given […]
Date: September 2nd, 2020
QUESTION 0.4) At its present level of operations, a small manufacturing firm has total variable costs equal to 65% of sales and total fixed costs equal to 20% of sales. If sales change by $1.00, operating income will change by The contribution margin as a percentage of total sales is referred to as contribution margin […]
Date: September 2nd, 2020
QUESTION B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only 60 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $750,000. By going through research, B&B will be able to b […]
Date: September 2nd, 2020
QUESTION Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, a maturity premium of 0.08% per year to maturity applies, i.e., MRP = 0.08%(t), where t is the years to maturity.Suppose also that a liquidity premium of 0.5% and a default risk premium of 0.85% applies to A-rated Real risk-free […]
Date: September 2nd, 2020
QUESTION You are thinking of retiring. Your retirement plan will pay you either $250,000 immediately on retirement or $350,000 five years after the date of your retirement. Which alternative should you choose if the interest rate is:a. 0% per yearb. 8% per yearc. 20% per year Interest rate Numbers of years Amount After int added […]
Date: September 2nd, 2020
QUESTION 4.Calculate the value of a non-callable 10-year bond with a coupon rate of 6% compounded semi-annually if you expect 8% yield on the bond. Assume a $1,000 face value for the bond.A) $864.10B) $918.89C) $1,137.11D) $828.81E) $1,085.305.Calculate the spread to treasuries on a 30 year corporate bond wi 4) According to the given information,FV […]
Date: September 2nd, 2020
