Question

As a present for doing so well in your finance class, your uncle has offered you a choice: He will give you either a zero coupon long term bond or a short term bond that pays coupon payments. Which would you choose and why (think about risk)?

Answer #1

Your rich uncle has just given you a high school graduation
present of $1,200,000. The present, however, is in the form of a
24-year bond with an annual interest rate of 4.1% compounded
annually. The bond says that it will be worth $1,200,000 in 24
years. What is this gift worth at the present time? (Round your
answer to the nearest cent.)
$

15. According to our class discussion of empirical findings in
stock markets, which of the following statements is (are)
correct?
(I) Poorly- or well-performing stocks tend to continue abnormal
performance over short horizons.
(II) Portfolios of high P/E stocks exhibit higher risk-adjusted
returns.
(III) Larger firms tend to have higher stock returns than smaller
firms.
(IV) Value stocks usually generate lower returns than growth
stocks.
(V) Stock prices of firms with negative earnings surprise tend to
rise.
(a) I only...

On the advice of your uncle, you purchased 10 shares of a
well-established U.S.-based corporate stock for $20.5 per share.
After 1 quarter, you received $0.25 per share dividends each
quarter for 2 years. At that point, the stock price had gone down
in a short-term recession, so you purchased 10 more shares at $14
per share. The stock continued to pay 25¢ a share on all 20 shares.
After 3 years (12 quarters), you decided to sell the stock...

Your brother has offered to give you $185 starting next year,
and after that growing at 2.7% per year for the next 20 years. You
would like to calculate the value of this offer by calculating how
much money you would need to deposit in a local bank so that the
amount will generate the same cash flows as he is offering you.
Your local bank will guarantee a 6.2% annual interest rate so long
as you have money in...

1A. Your uncle offers you a choice of $118,000 in 10 years or
$40,000 today. Use Appendix B as an approximate answer, but
calculate your final answer using the formula and financial
calculator methods.
a-1. If money is discounted at 11 percent, what is
the present value of the $118,000? (Do not round
intermediate calculations. Round your final answer to 2 decimal
places.)
a-2. Which offer should you choose?
1b. At a growth (interest) rate of 12...

Finance
1. A bond has a $1,000 par value, 10 years to maturity, and an
8% annual coupon and sells for $980.
a. What is its yield to maturity (YTM)? Round your answer to two
decimal places.
__%
b. Assume that the yield to maturity remains constant for the
next four years. What will the price be 4 years from today?Do not
round intermediate calculations. Round your answer to the nearest
cent.
$____
2. Nesmith Corporation's outstanding bonds have a...

1.You are offered a contract with a signing bonus. If they
offered you either $215,000 in cash or $2,000 a month for 15 years,
guaranteed, which do you take (based strictly on the math)? Your
safe rate of return is 7.5%.
2.You are 30 years old today and planning to retire at age 62.
You want to plan your finances for living 35 years past age 62 and
die dead broke. You determine you will need $3000 per month from...

The CFO of Floki's Shipbuilding has hired you to work in their
finance department. Your first project is to calculate the
company's weighted average cost of capital (WACC). You have Floki's
financial statements as well as the information below for your
calculations.
Short-term debt consists of bank loans at 4% and is used for
seasonal working capital needs. In the off-season short term, debt
is zero.
Long-term debt consists of bonds with a 7% coupon, paid
semi-annually and mature in...

You need a particular piece of equipment for your production
process. An equipment-leasing company has offered to lease the
equipment to you for $ 10 500 per year if you sign a guaranteed 5
-year lease (the lease is paid at the end of each year). The
company would also maintain the equipment for you as part of the
lease. Alternatively, you could buy and maintain the equipment
yourself. The cash flows from doing so are listed below (the
equipment...

Please discuss the following case study. In doing so, explain
your approach to the problem and execute your approach. Provide an
answer to the case study’s question with a recommendation.
Case Study:
The Secure and Safe Waste Management Company specializes in
handling recyclable materials as well as traditional waste removal
services. It is a small but publicly traded corporation. It
currently has a capital structure of $50 million in bonds which pay
a 5.5% coupon, $20 million in preferred stock...

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