Problem 2-18 Functions of Financial Markets (L03) Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Callaway Golf (ELY) Alaska Air Group (ALK) Yum! Brands (YUM) Caterpillar Tractor (CAT) Microsoft (MSFT) Number of Share (millions) 94.2 . 123.7 301.7 * 543.3 7,560 Stock Price 27.30 50.70 103.07 186.66 242.12 Market Capitalization (5 millions) $2,572 $ 6,272 $ 31,096 $ 101,412 $1,830,427 a. The price of Yum! Brands stock has risen to $160. What is the market value of the firm's equity if the number of outstanding shares does not change? Note: Enter your answer in dollars not in billions of dollars. b. The rating agency has revised Catalytic Concepts' bond rating to AAA (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? Note: Enter your answer as a percent rounded to 1 decimal place. c. A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed price, and the other agrees to sell. Which one sells?
Problem 2-18 Functions of Financial Markets (L03) Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Callaway Golf (ELY) Alaska Air Group (ALK) Yum! Brands (YUM) Caterpillar Tractor (CAT) Microsoft (MSFT) Number of Share (millions) 94.2 . 123.7 301.7 * 543.3 7,560 Stock Price 27.30 50.70 103.07 186.66 242.12 Market Capitalization (5 millions) $2,572 $ 6,272 $ 31,096 $ 101,412 $1,830,427 a. The price of Yum! Brands stock has risen to $160. What is the market value of the firm's equity if the number of outstanding shares does not change? Note: Enter your answer in dollars not in billions of dollars. b. The rating agency has revised Catalytic Concepts' bond rating to AAA (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? Note: Enter your answer as a percent rounded to 1 decimal place. c. A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed price, and the other agrees to sell. Which one sells?
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter3: Data Visualization
Section: Chapter Questions
Problem 10P: The file Fortune500 contains data for profits and market capitalizations from a recent sample of...
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Transcribed Image Text:Problem 2-18 Functions of Financial Markets (LO3)
Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table.
Market
capitalization
(5 millions)
Callaway Golf (ELY)
Alaska Air Group (ALK)
Yum! Brands (YUM)
Caterpillar Tractor (CAT)
Microsoft (MSFT)
Number of
M
Share
(millions)
94.2
123.7 M
301.7 X
543.3 X
7,560
a. Market value.
b. Interest rate
c. Which one sells?
Answer is complete but not entirely correct.
1,988,955
A farmer
$ 2,572
Stock Price
27.30
50.70
103.07
$ 31,096
186.66 - $ 101,412
242.12
$1,830,427
$ 6,272
a. The price of Yum! Brands stock has risen to $160. What is the market value of the firm's equity if the number of outstanding
shares does not change?
Note: Enter your answer in dollars not in billions of dollars.
b. The rating agency has revised Catalytic Concepts' bond rating to AAA (use Table 2.2). What interest rate, approximately, would
the company now need to pay on its bonds?
Note: Enter your answer as a percent rounded to 1 decimal place.
c. A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed
price, and the other agrees to sell. Which one sells?
1.7 %
-
-
-
Transcribed Image Text:Credit Rating
AAA
AA
A
BBB
BB
B
Interest Rate
1.68
1.6
1.7
2.4
4.2
5.6
Source: ICE Bank of America Merrill Lynch indices.
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