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MLK Bank has an asset portfolio that consists of $180 million of 15-year, 10.5 percent annual coupon, $1,000 bonds that sell at par.
a-2. What will be the new prices if market yields change immediately by ± 2.00 percent?
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- Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 3.4% rate of inflation in the future. The real risk-free rate is 2.0%, and the market risk premium is 6.0%. Mudd has a beta of 1.5, and its realized rate of return has averaged 9.0% over the past 5 years. Round your answer to two decimal places.Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow at the constant rate of 6% per year. The risk-free rate is 5%, and the expected return on the market portfolio is 10%. The stock has a beta of 0.66.Required: a. Calculate the market capitalization rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the intrinsic value of the stock?McCue Inc.'s bonds currently sell for $1,250. They pay a $90 annual coupon, have a 25-year maturity, and a $1,000 par value, but they can be called in 5 years at $1,050. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? Please explain the difference between YTM and YTC.
- One Coin Crypto (OCC), currently has assets with a market value of $100. Next year the market value of OCC's assets is going to increase by 50% or decrease by 40% depending on the state of the economy. The annual risk-free rate of interest is 0%. OCC has one share of common stock issued and outstanding as well as one corporate bond outstanding with a face value of $100 and a coupon rate of 5% maturing next year at t=1. The corporate bond has no callable, puttable or convertible features. (a) Find today's value of OCC's corporate bond and common stock. What is the promised yield to maturity of the corporate bond equal to? (b) Now suppose that in addition to the 5% coupon we also make the corporate bond convertible (at the discretion of the bondholder) into 2 shares of common stock. In other words, the bondholder has the right but not the obligation to exchange their bond into 2 shares of common stock when the bond matures. What is today's value of OCC's convertible corporate bond and…FIXY has assets of $2 million invested in a 25-year, 6 percent annual coupon Treasury bond selling at par. The assets are financed with equity and a $ 1700000, 4-year, 3 percent annual coupon capital note selling at par. What is the leverage adjusted duration gap of FIXY? What is the impact on equity value if the relative change in all market interest rates is AR/(1+R /2)=0.003?9. Read the following sentences and answer the questions. Company A plans to carry out $1 million in 1.5 years. Since this company is exposed to changes in the won-dollar exchange rate, it is trying to calculate the risk by applying the variance covariance method. The dollar-free coupons traded in the market have only one- year maturity and two-year maturity, and the yield of each bond is 5% and 6%. The annual volatility of the two bonds was 0.5% and 0.7%, respectively, and the correlation was estimated to be 0.80. 1) When 1 million dollars are mapped to two bond periods, find the present value of each 2) If a normal distribution is assumed under the 95% confidence level, find the non-variance VaRturncliversified Va) of the above position. 3) If a normal distribution is assumed under the 95% confidence level, find the diversified VaR (VaR) of the above position.
- Booher Book Stores has a beta of 0.4. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 6%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 14%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.Data for Solo Corporation is shown below. Now Solo has acquired some risky assets that cause its beta to increase by 30%. In addition, expected inflation increases by 2.00%. What is the stock's new required rate of return? Hint: Use the Capital Asset Pricing model equation. Briefly discuss your result. Market Beta is 1.00Initial required return (rs) 10.20%The market risk premium, RPM 6.00%Percentage increase in beta 30.00%Increase in inflation premium, IP 2.00%An insurance company must make payments to a customer of $10 million in one year and $5 million in five years. The yield curve is flat at 10%. Required: a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What must be the face value and market value of that zero-coupon bond? Note: Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places. a. Maturity of zero coupon bond b. Face value b. Market value years million million
- What are the excel formulas and answers to Part A and Part B. Part A: (Left Side) KIMCHI CORPORATION's capital investment bonds have a maturity of 10 years with a face value of $1,000 and a semi-annual 10% coupon. They are callable in 3 years at $1150 and currently sell for $1,290. What is the nominal yield to maturity and the nominal yield to call? What return should investors expect to earn on these bonds. Part B: (Right Side) KIMCHI CORPORATION also has bonds with 5 years left to maturity with an annual coupon of 10%. What would be the yield to maturity at a current market price of $850? What would be the yield to maturity if the current market price would be $1,125? What would be the price of the bond to you if your cost of capital was 12%? What would be the price of the bond to you if your cost of capital was 8%?MLK Bank has an asset portfolio that consists of $150 million of 15-year. 7.5 percent annual coupon, $1,000 bands that sell at par e-1. What will be the bonds new prices if market yields change immediately by ± 010 percent? a-2. What will be the new prices if market yields change immediately by = 2.00 percent? b-1. The duration of these bonds is 9.4892 years. What are the predicted bond prices in each of the four cases using the duration rule? b-2. What is the amount of error between the duration prediction and the actual market values? Complete this question by entering your answers in the tabs below. Required A1 Required A2 Required B1 Required B2 The duration of these bonds is 9.4892 years. What are the predicted bond prices in each of the four cases using the duration rule? (Do not round intermediate calculations. Enter all answers as positive numbers. Round your answers to decimal places, (ep.32.16)) AL-A 10% AL-0.10% A-20% At-20N Bonds' New Price E 000.00 990 51Suppose GE plans to issue a note that matures in 2 years and has a 3.67% coupon rate. If the market yield is 4.91%, what is the market price?