Suppose the yield on a bond that pays $100 in one year is currently 2%. If interest rates suddenly spike so that newly issued similar 1 year $100 bonds yield 4%, the price of the original bond will fall from 98.04 to 96.15.

Q: Rob has deposited K40,000 in his margin account and he wants to use the money to buy shares of the…

A: Percentage return on a stock refers to the yield on the stock after incrementing in price. Margin…

Q: you purchase a $10,000 T-note that matures on 12/31/28 (settlement occurs one day after purchase, so…

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Q: The Tomlinsons decided to sell their home for $355,000. They are charged a real estate commission of…

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Q: A bond is priced at 1169 and has a YTM of 0.055 when interest rates suddenly change by -80 basis…

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Q: a. A three-year zero-coupon bond or a five-year zero-coupon bond? b. A three-year zero-coupon bond…

A: Price of a bond is the PV of its future coupons and par value.  A zero-coupon bond is a bond that…

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A: Given:  Last annual dividend = $3.57  Required return = 7%    ABC Inc. does not expect to grow in…

Q: You have estimated that your vehicle will need to be replaced 10 years from now at a cost of K120,…

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Q: Windsor Corporation is considering investing in a new facility. The estimated cost of the facility…

A: Initial Investment is $3,280,000 Annual Cash Inflows is $629,000 Annual Cash Outflows is $227,000…

Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 million and…

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Q: Consider the project balances in the table below for a typical investment project with a service…

A: Interest rate is the rate that is used to calculate the cost to be paid by the borrower for taking a…

Q: You’re trying to determine whether or not to expand your business by building a new manufacturing…

A: To determine capital spending priorities, the ARR formula is employed. It is employed by businesses…

Q: What is the present worth of a PHP 1500 annuity starting at the end of the third year and continuing…

A:

Q: (a) The finance charge is $ (Round to the nearest dollar as needed.)

A: To determine the finance charge, we first need to determine the loan amount. This can be calculated…

Q: Indicate whether the following statements is true or false. Provide the relevant explanations.   In…

A: The cost of capital is the rate of return that investors require to invest in a company's…

Q: forecast is correct, what is the abnormal return (alpha) relative to the CAPM E(r) for Stock: D?…

A: To determine the alpha, we first need to determine the CAPM return using the formula below: Expected…

Q: If you invest $1 at 17 percent compounded monthly, about how many years would it take for your…

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Q: Katemba Engineering Limited is a copperbelt province based company. It is considering replacement of…

A: If the existing machine is retained, the net cash flow over the next five years will be the annual…

Q: Bella Traders uses a combination of shares and debt in their capital structure. The details are…

A: The weighted average cost of capital refers to the cost taht is incurred for generating the…

Q: You are told that the one-year spot rate is 6.5%. Use a spreadsheet to find the current long-term…

A: Here,

Q: The Horizon Company will Invest $84,000 in a temporary project that will generate the following cash…

A:

Q: In an equity research report, an analyst calculates a forward earnings yield of 12 per- cent. Noting…

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Q: Compute bank discount using: $12,000; 13%; 120 days ordinary interest proceeds effective interest…

A: When the benefits of compounding over time are taken into account, an effective annual interest rate…

Q: Caleb purchased a house for $300,000. He made a down payment of 25.00% of the value of the house and…

A: Loan: It represents the amount that will be borrowed by the borrower for the purpose of expanding…

Q: A stock price is currently $40. It is known that at the end of three months it will be either $45 or…

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A: Present value = pv =$84,000 Total Installments =28*12 = 336 months Interest rate = r = 5.7/12 =…

Q: 21. Julia purchased a 5 year 6% annual coupon bond one year ago for $990. She sold the bond today…

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Q: (Feb 21-27) ood Cost Severage Cost abor Cost Other Costs otal Costs ood Sales everage Sales otal…

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Q: At Barnes Bank, Delaney invests $11000 in an account that earns a 3.6% APR compounded biannually…

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A: Weighted Average Cost of Capital is also known as WACC. It is the cost capital which includes the…

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A: The capital expenditure is known and the depreciation schedule is known. Earnings before…

Q: Fomule Working Capital or Amount of Liquidity current assets - current liabilities Debt to equity…

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A: There are different methods for firms to raise funds from the market. It can be done by selling…

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A: Revolving credit account ensures that the credit line is available to the account holder even as the…

Q: Give typing answer with explanation and conclusion  Compute the future value of $1,000 compounded…

A: Future value refers to an amount of a current asset at some future date affected by interest arte,…

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A: The current market price of the share refers to the fair value of the share by considering the…

Q: Payments of $4,000, $5,200 and $6,500 are due in four months, sixteen months and eighteen months…

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A: The funds infused into the various investment alternatives available in the market is recognized as…

Q: X-treme Vitamin Company is considering two Investments, both of which cost $14,000. The cash flows…

A: Net Present Value is also known as NPV. It is a capital budgeting techniques which help in decision…

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A: It is a case of depositing funds for n years and afterward, issuing annual scholarships for…

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Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.