+1-415-315-9853

info@mywordsolution.com

## Finance

 Basic Finance Corporate Finance Financial Management Financial Econometrics Portfolio Management Risk Management Public Finance Business Law & Ethics

problem 1: Judy Johnson is choosing between investing in two Treasury securities which mature in five years and have par values of \$1,000. One is a Treasury note paying an annual coupon of 5.06 percent. The other is a TIPS that pays 3 % interest annually.

a) If inflation remains constant at 2 % annually over the next 5-years, what will be Judy’s annual interest income from the TIPS bond? From the Treasury note?

b) How much interest will Judy receive over the 5-years from the Treasury note? From the TIPS?

c) When each bond matures, what par value will Judy receive from the Treasury note? The TIPS?

d. After 5-years, what is Judy’s total income (interest + par) from each bond? Should she utilize this total as a way of deciding which bond to purchase?

problem 2: Suppose that a \$1,000 face value bond has a coupon rate of 8.5 percent, pays interest semi-annually, and has an 8-year life. If investors are willing to accept a 10.25 % rate of return on bonds of similar quality, what is the present value or worth of this bond?

problem 3: The Garcia Company’s bonds have a face value of \$1,000, will mature in 10-years, and carry a coupon rate of 16 %. Suppose interest payments are made semi-annually.

a) Find out the present value of the bond’s cash flows if the required rate of return is 16.64 %.

b) How would your answer change if the required rate of return is 12.36 %?

problem 4: Mercier Corporation’s stock is selling for \$95. It has just paid a dividend of \$5 s share. The expected growth rate in dividends is 8 %.

a) Find out the required rate of return on this stock?

b) By using your answer to (a), assume that Mercier announces developments that should lead to dividend increases of 10 % annually. What will be the new value of Mercier’s stock.

c) Again by using your answer to (a), suppose developments take place that leave investors expecting that dividends will not modify from their current levels in the foreseeable future. Now what will be the value of Mercier stock?

d) From your answers to (b) and (c), how significant are investor's expectations of future dividend growth to the current stock price?

problem 5: Given the information below, compute annualized returns:

Basic Finance, Finance

• Category:- Basic Finance
• Reference No.:- M91316

Have any Question?

## Related Questions in Basic Finance

### 1 suppose that a company is expected to pay a dividend per

1. Suppose that a company is expected to pay a dividend per share of \$20 per year forever. If investors require a 10% rate of return to invest in this stock, what is its price? 2. Suppose that a friend has started a busi ...

### Why is a combination of torque and angle measurement or

Why is a combination of torque and angle measurement or control so popular in mass production operations? What is meant by window control? What is meant by yield control in mass production applications? Does tightening a ...

### 1 what is the difference between an irr preference and an

1. What is the difference between an IRR preference and an IRR lookback? 2. What is the advantage of the limited partnership ownership form for real estate syndications? 3. How can the general partner-syndicator structur ...

### The table below shows the expected return and standard

The table below shows the expected return and standard deviation for two stocks. Is the pattern shown in the table possible? Explain your answer. Stock Beta Std. Dev. #1 1.5 22% #2 0.9 35%

### Writing assignmentthe capital budgeting decision techniques

Writing Assignment: The capital budgeting decision techniques discussed so far all have strengths and weaknesses; however, they do comprise the most popular rules for valuing projects. On the other hand, valuing an entir ...

### Explain the difference between a short hedge and a long

Explain the difference between a short hedge and a long hedge ? a. What is the basis? b. How is the basis expected to change over the life of a futures contract? c. Explain why a strengthening basis benefits a short hedg ...

### 1 what is meant by loan servicing2 identify the principal

1. What is meant by loan servicing? 2. Identify the principal sources of mortgage company income. 3. How does the Farm Credit System structure the various agencies that handle oversight of the farm mortgage lending funct ...

### Look again at figure 83 on page 237 and answer the

Look again at Figure 8.3 on page 237 and answer the following questions. a. Why is the demand curve for foreign exchange downward sloping? b. Why is the supply curve for foreign exchange upward sloping? c. Who would be i ...

### Explain what we mean when we say that the binomial model is

Explain what we mean when we say that the binomial model is a discrete time model and the Black-Scholes-Merton model is a continuous time model? Explain the difference between a normal and a lognormal distribution as it ...

### The concepts discussed in this section can also be applied

The concepts discussed in this section can also be applied to eliminate partially dead code. A definition of a variable is partial ly dead if the variable is live on some paths and not others. We can optimize the program ...

• 13,132 Experts

## Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

### WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

### Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

### Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

### Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

### Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro