Consider the following information from 2017.ItemT-billsReturn3.6%Corporate bonds 4.7%StocksInflation7.3%1.6%What is closest to the real return on corporate bonds?1%2%3%4%

The closest real return on corporate bonds to the answer choices is 3%.Explanation:Real return on…

Answered: Consider the following information from…

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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The following bond was quoted in The Wall Street Journal: Bonds Current yield Volume Close Net change NJ 4.125% 35 0.3% 5 79.875% +1.0625% Eight bonds were purchased yesterday, and 8 bonds were purchased today. How much more did the 8 bonds cost today?
The following bond was quoted in The Wall Street Journal: Bonds Current yield Volume Close Net change NJ 4.125% 35 2.5% 5 112.875% +1.25% Seven bonds were purchased yesterday, and 7 bonds were purchased today. How much more did the 7 bonds cost today?
la bonitob at bloky enig (7.8) The interest rate investors expect on a new bond issue can be determined by computing the for the company's Alternatively, it is possible on newly to determine the cost of new debt financing by finding the issued bond with similar (7.9) The firm's overall measure of the cost of capital is the cost of debt is the The dollar cost of equity is overall firm average cost of capital is the cost of equity plus the cost of debt, divided by The dollar (7.10) Interest (is / is not) a tax-deductible expense, and dividends paid to stockholders (are / are not). The payment of interest reduces the firm's taxes by after-tax cost of debt in dollars equals The after-tax cost of debt in percentage terms is WACC = dito The The
Calculate Cost of Common Equity using CAPM (Capital Asset Pricing Model), DCF (Discounted Cash Flow Model) and Bond Yield Risk Premium CAPM data: VEC’s beta = 1.2 The yield on T-bonds = 3% Market risk premium = 7% DCF data: Stock price = $27.08 Last year’s dividend (D0) = $2.10 Expected dividend growth rate = 4% Bond-yield-plus-risk-premium data: Risk premium = 5.5% Amount of retained earnings available = $80,000 Floatation cost for newly issued shares = 7%
23
In the past, Abbott Labs had two bond issues outstanding with the following characteristics. Issue Interest Rate Maturity Current Price A 6% 2008 115 B 6% 2012 118 Answer the following the questions regarding these bond issues. Which issue, A or B, has the higher effective rate of interest? How can you tell?
Use the data in the tables below to answer the following questions: Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017. Average Premium Portfolio Treasury bills Treasury bonds Common stocks Average Annual Rate of Return (%) (Extra return versus Treasury bills) (%) 3.8 5.3 11.5 1.5 7.7 Standard deviation of returns, 1900-2017. Standard Portfolio Deviation (%) Treasury bills 2.9 Long-term government bonds 9.0 Common stocks 19.7 a. What was the average rate of return on large U.S. common stocks from 1900 to 2017? b. What was the average risk premium on large stocks? c. What was the standard deviation of returns on common stocks? (Enter your answer as a percent rounded to 1 decimal place.) a. Average rate of return 11.5 % b. Average risk premium 7.7 % C. Standard deviation of returns 19.7 %
Consider the following information on different asset classes from 1926 through 2020. Arithmetic Mean 12.2% 16.2 6.5 6.1 5.3 3.3 2.9 Series Large-company stocks Small-company stocks Long-term corporate bonds Long-term government bonds Intermediate-term government bonds U.S. Treasury bills Inflation a. What is the real return on long-term government bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the real return on long-term corporate bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Real return b. Real return % %
Which one of the following categories has the widest frequency distribution of returns for the period 1926-2014? Multiple Choice Small-company stocks U.S. Treasury bills Long-term government bonds Inflation Large-company stock
Question 10 Use the following information to answer the question(s) below. Consider the following information regarding corporate bonds: Rating Average Default Rate 0.0% 0.1% 0.2% Recession Default Rate 0.0% 1.0% 3.0% AAA AA A BBB BB B CCC 0.5% 2.2% 5.5% 12.2% 3.0% | 8.0% 16.0% 48.0% Average Beta 0.05 0.05 0.05 0.10 0.17 0.26 0.31 Nielson Motors plans to issue 10-year bonds that it believes will have an BBB rating. Suppose AAA bonds with the same maturity have a 4.1% yield. Assume that the market risk premium is 4% and the expected loss rate in the event of default on the bonds is 73%. The yield that these bonds will have to pay during a recession is closest to (%) (2 decimal places):
Calculate the accrued interest (in $) and the total proceeds (in $) of the bond sale. (Round your answers to the nearest cent.) Company CouponRate MarketPrice TimeSince LastInterest AccruedInterest Commissionper Bond BondsSold TotalPrice Company 4 10.825% 77.00 85 days $ $11.00 15 $
options: A)11.5% B)10.1% C)5.1% D)7.35%

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Consider the following information from 2017. Item T-bills Return 3.6% Corporate bonds 4.7% Stocks Inflation 7.3% 1.6% What is closest to the real return on corporate bonds? 1% 2% 3% 4%