:38Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 10 percent.a. How much would you pay for a 10-year bond with a par value of $1,000 and a 8.3 percent coupon rate? Assume interest is paidannually.b. How much would you pay for a share of preferred stock paying a $5.7-per-share annual dividend forever?c. A company is planning to set aside money to repay $163 million in bonds that will be coming due in ten years. How much moneywould the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? Howwould your answer change if the money were deposited at the beginning of each year?Note: Round your answers to 2 decimal places.a. PVb. PVc1. PMTmilliontesc2. PMT9.30 million

Step 1:a) Given that, Face value (FV) = $1,000 Coupon rate = 8.3% Coupon payment (PMT) = Coupon…

Answered: :38 Solve the following problems…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter16: Financial Planning And Control

Section: Chapter Questions

Problem 13PROB

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A4 3 You bought one of BB Co.’s 10% coupon bonds one year ago for $1100. These bonds make annual payments, have a face value of $1000 each, and mature seven years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 8%. If the inflation rate was 3% over the past year, what would be your total real return on investment according to the Exact Fisher Formula?
QUESTION 65 The assets of Uptown Stores are currently worth $346,000. These assets are expected to be worth either $320,000 or $365,000 one year from now. The company has a pure discount bond outstanding with a $350,000 face value and a maturity date of one year. The risk-free rate is 3.9 percent. What is the value of the equity in this firm? • $11,347 • $9,507 • $10,015 • $9.915 O $12,671
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Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. \table[[a. PV,,],[b. PV,,],[c1. PMT,,million],[c2. PMT,9.60,million]]
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QUESTION 4 A bank holds 10-year 8% coupon Treasury bonds with a face value of $1,000,000. The current market rate is 7%. What is the 10-day VAR if the standard deviation is estimated at 35 basis points? Use a 99% level of confidence (z=2.33) and traditional pricing. 57,752.03 182,627.94 $41,215.41 $62,226.27
10. A $1,000 face value corporate bond bearing a 12 percent coupon rate will mature in 10 years. If the current market rate of return is 10 percent for bonds of this nature, what is the current theoretical market value of the bond (assume semiannual interest payments)? A) $850.61 B) $887.00 C) $1,124.62 D) $1,170.27
Y6 Consider a stock priced at $40 that pays an annual dividend of $ 1 per share. An investor purchases the stock on margin, paying $20 per share and borrowing the remainder from the brokerage firm at 10 percent annual interest. a. If, after one year, the stock is sold at a price of $60 per share, what is the return on the stock? b. If investors had used only personal funds rather than borrowing funds, what would have been the stock return?
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