If a $1,000 bond has a coupon rate of 11% and the market interest rate falls to 7%, what would a person expect to pay for that bond? O $1,000 O $1,571.43 O $636.36 O $1,371.33
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- The sole proprietor of the FM2 Financial Services, Bondo, receives allaccounting profits earned by her firm and a K28,000-a-year salary she pays herself. Itis noteworthy that she also has a standing salary offer of K35,000 a year if she agreesto work for Bank of Zambia. If she had invested her capital outside her own company,she estimates that would have made a return of K22,000 a year. Further, informationhas reached you that last year, Bondo’s accounting profit was K50,000. Calculate hereconomic profit?Microsoft has the opportunity to purchase a new factory today that will provide them with a $50 million return four years from now. If prevailing interest rates are 6 percent, what is the maximum that the project can cost for Microsoft to be willing to undertake the project? a. $53,406,002 b. $39,604,682 c. $43,456,838 d. $50,000,000 e. $34,583,902 D DWhat is the market price of a zero-coupon bond (that is, a bond that will not pay any coupon payments) that will mature in 20 years and has the face value of $1,000? Assume the yield to maturity is 6.2%, and that it will compound semiannually. Group of answer choices $372.53 $350.24 $300.27 $294.89
- 21. Find the annual payments to extinguish a debt of P 10,000 – payable in 5 years at 12%.An entrepreneur recently learned about a new hotel business that requires an initial investment of $12M and annual cash flow of $2M in perpetuity. The appropriate discount rate is 20%. Now, consider a pretty similar scenario: an Initial investment $12M. Now, in good state, $6M annual cash flows. In a bad state, -$2M annual cash flows. Furthermore, assume that the entrepreneur wants to own at most, 1 hotel (no option to expand). - But things change when we consider the abandonment option. At date 1, the entrepreneur will know which forecast has come true. If the world is in the good state, he will keep the project alive. If bad state, he will abandon the hotel after period 1. - Now, what is the NPV of the project? - What is the value of the option to abandon?A stock currently sells for 11 TL per share and pays 0.16 TL per year in dividends. What is an investor's valuation of this stock if she expects it to be selling for 14 TL in one year and requires a 10 % return on equity investments? a. 12,89% b. 12,73% c. 12,87% d. 10%
- A corporate bond maturing in 15 years with a coupon rate of 10.9 percent was purchased for $970 and it now selling for $1,000. 1. What will be its selling price in two years if comparable market interest rates drop 4.9 percentage points? (Hint: Use Appendix A-2 and Appendix A-4 or the Garman/Forgue companion website.) Round Present Value of a Single Amount and Present Value of Series of Equal Amounts in intermediate calculations to four decimal places. Round your answer to the nearest cent. $ 2. Calculate the bond's YTM using Equation 14.5 or the Garman/Forgue companion website. Round your answer to two decimal places. %8. Question 1 Fatu took out an endowment policy. The first annual payment was Rx, whereafter it increased yearly by R1 700. After 20 years the policy paid out R1 005 962. The applicable yearly interest rate is 10%. The value of x is approximately A. R11 816. B.R17 564. C.R6 500. D.R564. Question 2 Daniel asks to reschedule the compensation in three payments,the first payment now ,the second payment twice the size of the first payment for four years from now and the third payment three times the size of the first payment nine years from now.The boxing fund agrees on condition that the interest rate changes to 10.95% per year compounded monthly .The amount to the nearest hundred rand that Daniel can expect to receive four years from now is A R 864 000 B.R 557510 C.184 800 D.369 600Susie Lee won a lottery. She will have a choice of receiving $25,000 at the end of each year for the next 30 years, or a lump sum today. If she can earn an annual return of 10 percent on any investment she makes, what is the least she should be willing to accept today as a lump-sum payment? (Round to the nearest hundred dollars.) Use the NPV as you have equal cash flows of $25,000 for the next 30 years.
- The drug company Pfizer is considering whether to invest in the developing of a new cancer drug. Development will require an initial investment of $10 million now; beginning one year from now, the drug will generate annual profits of $4 million for three years. What is the present discounted value of the drug? Assume the interest rate is i%.Suppose you purchased a corporate bond with a 10-year maturity, a $1,000 par value, a 9% coupon rate ($45 interest payment every six months), and semiannual interest payments. Five years after the bonds were purchased, the going rate of interest on new bonds fell to 6% (or 6% compounded semiannually). What is the current market value (P) of the bond (five years after the purchase)?(a) P = $890(b) p = $1,223(c) P = $1,090(d) p = $1,128Fatima is an owner of a building and she can lease her building for 100,000 AED per year for two years. The explicit cost of maintaining the building is 30,000 AED, and the implicit cost is 50,000AED. All revenues are received, and costs borne, at the end of each year. If the interest rate is 10 percent, determine the present value of the stream of Accounting Profits? Economic Profits?
