Assume that the rate on a floater is set at LIBOR + 3%, that the floater portion of a class is 75 percent, and that the weighted-average coupon of the floater plus inverse floater should be eight percent. Determine the cap on the formula for the inverse floater that will accomplish this. 23% 26% 20% 28% 36%

Assume that the rate on a floater is set at LIBOR + 3%, that the floater portion of a class is 75 percent, and that the weighted-average coupon of the floater plus inverse floater should be eight percent. Determine the cap on the formula for the inverse floater that will accomplish this. 23% 26% 20% 28% 36%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Can you explain step by step how you get $1,104.23 by plugging in the numbers and using the formula below?: Given: Coupon rate (6.55%), maturity (15 years), purchase YTM (6.15%). Adjust coupon and maturity for semi-annual periods: Coupon per period = 6.55% / 2 = 3.275%. Number of periods = 15 years * 2 = 30 periods. Use the bond pricing formula: Price = (Coupon * (1 - (1 + YTM/2)^-Number of periods)) / (YTM/2 + (1 + YTM/2)^-Number of periods) Plug in the values: Price ≈ $1,104.23.
D6 AMXL price is at 16.20, AMXL is expected to pay a dividend of 16 cents in 30 days and pay a dividend of 16 cents in 60 days. The 30-day risk-free rate is 8% and the 60-day risk-free rate is 8.60%. Do the following operations.a) Calculate the price of the 45-day forward
Let's value a REIT using Net Asset Value another way. (All values are in Millions) Assume a REIT has debt of 1,000M, there are 100M shares outstanding, both the stock price and NAV/share equal $5, and a fair cap rate for the portfolio is 10.0%, what is the implied NOI? $100M $105.5M $101 M $150M
The Treasury bill rate is 4%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.7 offers an expected return of 9.0%, does it have a positive or negative NPV? d. If the market expects a return of 12.0% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.) a. Market risk premium b. Return on investment % C. NPV d. Beta
what is the rate of return from t to t+1 on abond that is priced at 2,000 initially, provides a coupon paymentat time t+1of 40$ and has its price rise to 2,100 at time t+1
Calculate the yield on the following bonds: A. Cost $1,000, semiannual coupon payment 3%. Since 3% is semiannual, then double it to get 6% annual yield. Always calculate yield in terms of annual percentage. B. Cost $950, semiannual coupon payment 3%. Since 3% is semiannual, then double it to get 6% annual yield. Always calculate yield in terms of annual percentage.
Consider a CDO with a total notional of $500 million, consisting of three tranches: Senior (75%), Mezzanine (15%), and Equity (10%). The underlying portfolio has a total expected loss of 6%. a. Calculate the expected losses for each tranche, assuming they follow the standard tranche subordination rules. b. If the actual realized losses are 30%, determine the losses allocated to each tranche. c. Plot a graph that shows how the payoff of the holders to the Mezzanine tranche owners varies with the value of the assets in the mortgage pool at the time of maturity. d. Represent this payoff as a combination of payoffs of options and risk-free debt for Mezzanine tranche. e. Suppose the CDO manager decides to create a fourth tranche, called the Super- Senior tranche, which has the highest priority in the cash flow waterfall. If the Super-Senior tranche is sized at 50% of the total notional, recalculate the expected losses for all tranches. (hint: Super- Senior tranche is created out of Senior…
XYZ has a beta coefficient of 1.76. Estimate its cost of equity if the risk-free rate is 8% and return on the broad market index is 16%. Calculate the cost of equity.
Five alternatives (A, B, C, D, and E) are compared. The present worth (Pw) and internal rate of return (IRR) values for these alternatives are ($1,500, 13.42%) for A; ($570, 12.85%) for B; ($1,300, 11.91%) for C; ($2,300, 12.54%) for D; and ($2,950, 12.95%) for E. Alternative A has the lowest capital investment, followed by B, C, D, and then E. If the alternatives are mutually exclusive, which one should be selected when the minimum attractive rate of return (MARR) is 10%? O a. Alternative B O b. Alternative D O C. Alternative c O d. Alternative E O e. Alternative A
quiz 8- 10 and 11
Assume that thr nominal interest rate is 14%, the risk premium is 4% and real interest rate is 3%, find the inflation rate and the risk free interest rate.

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