Q: 9. A $12,000 car loan at 2.5% for 4 years has a monthly payment of $2E for 3 years has a monthly…
A: Loan payments are paid by the monthly payment that carry the payment for interest and payment for…
Q: In the transit business, a rule of thumb suggests that for every 1% rise in fares, ridership will…
A: Current Ridership = 3500 Current Fare = 7 1% rise in fares will reduce ridership by 0.20% Update…
Q: The final option is for Tully to complete a doctorate degree in economics after finishing his…
A: The rate at which cash flows are discounted is known as the discount rate. It can be the internal…
Q: A contract has been signed to lease a building at P50, 000 per year with an annual increase of P1,…
A: First year lease (L1) = P 50000 L2 = P 51000 L3 = P 52000 L4 = P 53000 L5 = P 54000 r = 7%
Q: Problem 1 The cash flow shown in Figure 1 is in $1000 units. With an interest rate of 10%, determine…
A: Interest rate = 10% Year Cash flow 1 500000 2 600000 3 700000 4 800000 5 900000 6…
Q: an investor, Erik, is offered the investment opportunities described in the table below. Each…
A: Risk averse means a person who takes risk for additional return. Risk loving means a person who…
Q: 30. The internal rate of return is the simple (noncompounded) interest rate that equates the present…
A: The internal rate of return (IRR) is the rate at which initial investment equals the present value…
Q: Why do firms hedge their risk and what determines the choice of contract for hedging?
A: Hedging is a risk management approach that involves acquiring an opposing position in a comparable…
Q: The component that analyzes profitability is • , and its value is The component that analyses…
A: DuPont Analysis has been developed by the DuPont Corporation for decomposing different aspects of…
Q: 5. Determine the capitalized cost of an expenditure of P 200,000 at time 0, P 25,000 in years 2…
A: Time value of money (TVM) is used to measure the value of money at different point of time in the…
Q: Fatima recently set up a tax-deferred annuity to save for her retirement. She arranged to have BD…
A: Working Note # 1 : P= Payment per period = BD 110 R= Rate of interest per period =2%/12 =…
Q: A key feature of Kaizen is that improvements are achieved by making
A: Given statement is Features of kalzen is improvements by making.
Q: The following information is from Dave's Sporting Goods. Dave’s is a Midwest sporting goods store…
A: Given in the question is the information regarding DAVE'S SPORTING GOODS,
Q: Your company must make a $326,000 balloon payment on a lease 2 years and 9 months from today. You…
A: Balloon payment needed = $326000 n = 2 years 9 months = 11 quarters r = 4% per year = 1% per quarter…
Q: Consider the case of Alexander Industries: Alexander Industries is considering a project that…
A: Given that: Equipment cost= $3570000 Company's Tax Rate=25% hence Equipment cost after tax =…
Q: Outline four factors that determine the choice of the best technique of risk control for a small…
A: A small business is a privately owned corporation, partnership, or sole proprietorship having fewer…
Q: 4. Find the quarterly payment inr 21 quatters to discharge an obligation of P24,500, if money is…
A: A stream of equal cash flows paid or received periodically is termed as annuity. Annuity is either…
Q: Deferred Annuity (please don’t use excel) 1. Find the present value of a deferred annuity of P1,250…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: A 180-day simple interest note was signed on March 15, 20xx with a face value of 65,000 at 8.25% per…
A: Here, Face value = 65,000 Interest rate = 8.25% Discount rate = 11% Time to maturity = 180 days To…
Q: Boiser deposited part of her royalty in a bank at the end of each year for 10 years. The bank paid…
A: We need to use future value of ordinary annuity formula to calculate total amount of deposited…
Q: What is the relationship between return on capital investment and the risk associated with the…
A: Return on invested capital is referred as an amount of the funds of the corporation, which helps in…
Q: When firms enter into loan agreements with their bank, it is very common for the agreement to have…
A: a) Current Ratio = Current Assets/Current Liabilities = 1,907,570,000/ 1,362,550,000 = 1.40
Q: Quantitative Problem: Potter Industries has a bond issue outstanding with an annual coupon of 6% and…
A: a) excel formula sheet is:
Q: 5c. An elective project is currently under review. It requires an initial investment of $116,000 for…
A: In capital budgeting, the economic rate of return is used to compare or quantify the investment's…
Q: 4. A note having a face value of P9,300 was discounted at 11%. If the proceeds were 8,788.50. Find…
A: In order to calculate the term of the loan in months, where, other values viz. face value, discount…
Q: A credit card company determines a card holder's minimum monthly payment by adding all new interest…
A: Total outstanding principal = $592+$429+$120+$104Total outstanding principal = $1245 Total days till…
Q: a young woman plan to retire 30 years. She intends to contribute the same amount of money each year…
A: Annual withdrawal (P) = $100,000 Number of annual withdrawal (n) = 20 Interest rate (r) = 10%…
Q: Consider two riskless perpetuities: (i) pays $120 every year; (ii) pays $10 every month. If the…
A: Perpetuity: Perpetuity is the series of fixed payments which is incurred or received for the…
Q: Explain economic impact of the capital market?
A: Capital markets are very important for the growth and development of any country and are important…
Q: How did you calculate the depriciation expense?
A: This method also called diminishing balance method or declining balance method where the…
Q: A project has estimated annual net cash flows of $7,500 for ten years and is estimated to cost…
A: Net present value(NPV) is the difference between present value of cash inflows and initial…
Q: Stock in CDB Industries has a beta of 1.12. The market risk premium is 7.2 fercent, and T-bills are…
A: Using CAPM: Cost of equity = Risk-free rate + Beta(Market risk premium) Cost of equity = 0.042 +…
Q: The cash flows associated with a public-school building repair project are as follows: costs…
A: Annual benefit (B) = $600,000 Annual dis benefits (D) = $90,000 Annual cost (C) = $550,000
Q: Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 3.2%…
A: Capital Asset Pricing Model (CAPM): CAPM is the method of calculating the expected return on…
Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…
A: CALCULATING WEIGHTED AVERAGE COST OF CAPITAL (WACC) Cost of equity = D1P+ g where D1 is the expected…
Q: 9. Calculating Project OCF H. Cochran, Inc., is considering a new three-year expansion project that…
A: Solution : Operating Cash Flow ( OCF) means that Cash flow which was generated by entity through his…
Q: 1. Why is BPI a universal bank?? and cite one single example as evidence? 2. Why is CIMB bank a…
A: The term commercial bank receives deposits, provides check account services, issues a variety of…
Q: interest, a $20,000 payment 10 years from now is equivalent to an annual payment for 15 years. The…
A: The future value of the payment includes the amount deposited and the interest accumulated over the…
Q: We'll be holding a fundraiser over the next 5 years. Because we'll be learning how to market the…
A: The increasing payment flow which rises proportionately for a finite period and ends after lapse of…
Q: for this equipment. 6. Calculating Salvage Value Consider an asset that costs $635,000 and is…
A: Cost of assets = $635,000 Life = 8 Years Annual depreciation = 635000/8 = $79375 Life used = 5 Years…
Q: Explain what type of firms a Buyout Fund (or a Private Equity Fund) might target as part of a…
A: A leveraged buyout (LBO) is a type of business acquisition in which the vast majority of the cost of…
Q: The Hills obtain a 30-year, $144,000 conventional mortgage at a 4.5% rate on a house selling for…
A: Here, Cost of House is $180,000 Mortgage Amount is $144,000 Interest Rate is 4.5% Time Period of…
Q: (a) Patty Stacey deposits $2000 at the end of each of 5 years in an IRA. If she leaves the money…
A: Given,
Q: The expenses included in the fabrication of a wind turbine for a planned Wind Farm is $73,000…
A: Investment needed today (X) = $16000 First year cost saving (S1) = $73000 - $58000 = $15000 S2 to S5…
Q: A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance…
A: Covariance between stock X and stock Y (CovX,Y) = 0.10 Standard deviation of stock X (SDX) = 0.50…
Q: A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross…
A: Here, Initial investment = P 120,000 Time period = 8 years Salvage value = P 20,000 Annual income =…
Q: Ms Amanda du Toit wishes to purchase the lounge suite. A furniture store offers her R1225 in hire…
A: VAT is a sales tax applicable on the sale and purchase of goods and services. It is collected by the…
Q: Assume yourself as a senior manager of a healthcare organization and you have given the…
A: A capital investment decision by a company is a long-term growth strategy. To secure future growth,…
Q: State of Economy Probability ABC Company Expected Return Expected Return XYZ Company Very Poor 0.30…
A: Solution : Co-Variance is calculated as follows. Co-Variance : Dx * Dy / N…
Q: On 1 April 2018, Magda received a low interest loan of $40,000 from her employer, ABC Pty Ltd. The…
A: 'Grossing up' involves increasing the taxable value of benefits you supply to reflect the gross wage…
Describe Why Some Bonds are Risky:
- Default Risk:
- Risk Premium:
- Impact of Economic Conditions
Step by step
Solved in 4 steps
- What is interest rate risk, and how does it relate to callable bonds? Explain using an example of your own choosing.. What is interest rate risk and what is the relation between interest rate risk and callable bonds. Explain with the help of an example of your own choice.Does the interest rate on a T-bond include a default risk premium? Explain.
- How are interest rate risk and reinvestment raterisk related to the maturity risk premium?What is the relationship between interest rate level and bond price? Why must this relationship be true? How has the current rate environment impacted the prices of bonds?What is the relationship between interest rates and bond valuations? What are the fundamental assumptions that go into determining the value of a bond?