Practice_CostCapital

Question Consider the following balance sheet positions for a financial institution:• Rate-sensitive assets = $120 million; Rate-sensitive liabilities = $180 million.• Rate-sensitive assets = $230 million; Rate-sensitive liabilities = $200 million.a) Calculate the repricing gap and the impact on net interest income of a 2 percent increase in interest rates for each position. b) Calculate the repricing gap and the impact on net interest income of a 2 percent decrease in interest rates for each position.c) Explain the type of risk this FI is exposed to in each position.  Kindly explain in detail

Balance Sheet (dollars in thousands) and Duration (in years)                Duration       AmountT-bills.          0.5 $           90T-notes        0.9               55T-bonds   4.393             176Loans              7           2,724Deposits.        1           2,092Fed. funds 0.01         238Equity                              715What is the average duration of all the assets? What is the average duration of all the liabilities? What is the FI’s leverage-adjusted duration gap? What is the FI’s interest rate risk exposure? If the entire yield curve shifted upward 0.5 percent (i.e., ΔR/(1 + R) = 0.0050), what is the impact on the FI’s market value of equity? If the entire yield curve shifted downward 0.25 percent (i.e., ΔR/(1 + R) = −0.0025), what is the impact on the FI’s market value of equity?

A company must make a payment of $2500 in 5 years. Four-year zero coupon bonds and seven-year zero coupon bonds are available for investment. These bonds could be purchased in any quantity and the yield rate is 3% effective. Let A and B be the face values of the 4-year and 7-year zero-coupon bonds, respectively, that are purchased to satisfy full immunization against any changes in interest rates. Find A. Possible Answers A 1262 1431 C 1618 D 1725 E 1962

2. An overview of a firm's cost of debt To calculate the after-tax cost of debt, multiply the before-tax cost of debt by Perpetualcold Refrigeration Company (PRC) can borrow funds at an interest rate of 12.50% for a period of four years. Its marginal federal-plus-state tax rate is 25%. PRC's after-tax cost of debt is (rounded to two decimal places). At the present time, Perpetualcold Refrigeration Company (PRC) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,495.56 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If PRC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 3.38% 3.53% 2.94% 2.35%

Calculate the Cost of Debt/YTM: Par value = $1,000, non-callable Market value = $1,085.59 Coupon interest = 6%, annual payments Remaining maturity = 20 years New bonds can be privately placed without any flotation costs

Man.6

Please do your own work, don't copy from the internet   Q5)  Calculate the aftertax cost of debt under each of the following conditions: Yield Corporate Tax Rate a.      8.0% 18% b.     12.0% 34% c.     10.6% 15%               Solution: Kd = Yield (1 – T)   Yield              (1 – T)          Yield (1 – T) 8.0% (1 – .18)              12.0% (1 – .34)

Consider the following information for a period of years: Long-term government bonds Long-term corporate bonds Inflation Arithmetic Mean 7.8% a. Long-term government bonds b. Long-term corporate bonds 7.9 3.5 a. What is the real return on long-term government bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the real return on long-term corporate bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 4.25% %

If corporate bonds are traded 4% above the government bond rate of 8% and the recovery rate on default loans is 50%. What is the probability that the borrower of this loan will default on its repayment? C

Financial accounting solve this question

A Corporation is planning to loan P20M at an effective interest rate of 10%. The company pays income tax at a rate of 30%. What is the cost of debt capital? a. P140,000 b. P200,000 c. P540,000 d. P600,000

The following data pertains to Xena Corp.   Xena Corp. Total Assets $21,249 Interest-Bearing Debt (market value) $11,070 Average borrowing rate for debt 10.2% Common Equity:   Book Value $5,535 Market Value $23,247 Marginal Income Tax Rate 19% Market Beta 1.64         A.  Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's weighted-average cost of capital: B. Using the information from the table, determine the weight on equity capital that should be used to calculate Xena's weighted-average cost of capital.

The following data pertains to Xena Corp.   Xena Corp. Total Assets $21,249 Interest-Bearing Debt (market value) $11,070 Average borrowing rate for debt 10.2% Common Equity:   Book Value $5,535 Market Value $23,247 Marginal Income Tax Rate 19% Market Beta 1.64         A.  Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's cost of equity capital, using the capital asset pricing model:   B.  Using the information from the table, determine the weight on debt capital that should be used to calculate Xena's weighted-average cost of capital.

Give typing answer with explanation and conclusion

Give only typing answer with explanation and conclusion

Please help me!

A company's investments earn LIBOR minus 0.5%. Explain how it can use the quotes in Table  to convert the investments to (a) 3-year, (b) 5-year, and (c) 10-year fixed-rate investments.

Finance