The M.I.R.R. is based on a Cash flows being reinvested at a rate always different from WACC b Cash flows being reinvested at the WACC or a comparable rate. c Cash flows being reinvested at the YTM on treasury bonds. d Cash flows being reinvested at the IRR
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The M.I.R.R. is based on
|
a |
Cash flows being reinvested at a rate always different from WACC |
|
b |
Cash flows being reinvested at the WACC or a comparable rate. |
|
c |
Cash flows being reinvested at the YTM on treasury bonds. |
|
d |
Cash flows being reinvested at the IRR. |
Step by step
Solved in 2 steps
- Considering the Market for Loanable Funds, explain what the following statement means: “Bonds should be issued only if the potential increase in interest rates is attributed to a strong demand for loanable funds RATHER than the FED’s reduction in the supply of loanable funds.”A corporate issue will be brought to the market at aspread of T+ 68bp. Explain what this means andassuminga treasury yield of 1.50% what would be theinitial yield of this bond? Why are Treasuries seen assuitable benchmarks for pricing corporate bonds?From page 9-3 of the VLN, what are the cash flows from a bond that must be present valued back to today? Group of answer choices A. The face amount only B. The interest payments only C. The issue price only D. The face amount and interest payments
- You are given the following details of three default free government bonds. Assume that one can take long (buy) and short (sell) positions in these bonds. CF stands for cash flow. Bond Current price Today CF Year 1 CF Year 2 A 95.24 100 0 B 89.85 0 100 C X 70 1070 Assuming that the current market prices of Bond A and Bond B are correct, then, what should be the current theoretical (fundamental) price of Bond C, as per the no-arbitrage principle, i.e., what is the value of X? [Do not round-off any numbers. If at all you want to round-off a number, round it off at 8 decimal places.]With open market operations, the federal reserve sets the interest rate it lends to banks. Ture or falseWhich of the following statements is not correct? a) The export value of the bond; the value the investor pays when buying bonds b) Nominal value of the bond; is the value written on the bond c) Another reason for the difference in bond market prices is the dividend paid to bonds. d) Periodic interest amounts on bonds are calculated at nominal value. e) Market value of a bond is equal to the present value of the interest to be paid by the bond and the principal amount to be paid at the end of maturity. ------------------ What is the market value of İdil Gıda's bond with a nominal value of 15000 USD, maturity of 3 years and 30% annual interest payment, assuming that the desired yield rate is 36%? a) 12500b) 13494c) 9000d) 5456e) 7594 ============ What is the market value of Beril Gıda A.Ş.'s bond with a nominal value of USD 12,000, maturity of 5 years and an annual interest payment of 25%, when the desired rate of return is 25%? a) 18000b) 15000c) 12000d) 16000e)…
- The yield-to-maturity of a typical corporate bond, relative to a US Treasury bond with the same maturity, will be _________________ due to _________________ risk. A) lower; default B) lower; interest rate C) higher; default D) higher; interest rateIn the federal funds markets, financial institutions can borrow money from the Federal Reserve. True False Assuming the STRIPS are held to maturity, their investors know the precise payouts they'll receive. True FalseWhich of the following facilitates trading of short term corporate bonds in an economy? Select one: A. Capital Market B. All of the given options C. Money Market D. Foreign Exchange Market
- All else held constant, which one of the following bonds is likely to have the highest required rate of return? a. AAA-rated noncallable corporate bond with a sinking fund b. AA-rated callable corporate bond with a sinking fund c. AAA-rated callable corporate bond with a sinking fund d. High-quality municipal bond e. AA-rated callable corporate bond without a sinking fund Clear my choiceWhich of the following is not a way on how to determine the initial measurement of a bond on its issuance? market quotation future value of present cash flows issuance price less issuance cost present value of future cash flowsFrom page 9-2 of the VLN, what is the first thing you want to identify when approaching a bond problem? Group of answer choices A. Annual bond or semiannual bond B. Whether the market rate is different from the stated rate. C. The cash flows provided by the bond. D. The company's debt to equity ratio.
