EBK PRINCIPLES OF CORPORATE FINANCE
12th Edition
ISBN: 9781259358487
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 13, Problem 5PS
Market efficiency How would you respond to the following comments?
- a. “
Efficient market , my eye! I know lots of investors who do crazy things.” - b. “Efficient market? Balderdash! I know at least a dozen people who have made a bundle in the stock market.”
- c. “The trouble with the efficient-market theory is that it ignores investors’ psychology.”
- d. “Despite all the limitations, the best guide to a company’s value is its written-down book value. It is much more stable than market value, which depends on temporary fashions.”
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Given the following information concerning a convertible bond:
a. What is the current yield of this bond?
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b. What is the value of the bond based on the market price of the common stock?
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c. What is the value of the common stock based on the market price of the bond?
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d. What is the premium in terms of stock that the investor pays when he or she purchases the convertible bond instead of the stock?
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e. Nonconvertible bonds are selling with a yield to maturity of 7 percent. If this bond lacked the conversion feature, what would the approximate price of the bond be?
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h. If the price of the common stock should decline by 50…
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Chapter 13 Solutions
EBK PRINCIPLES OF CORPORATE FINANCE
Ch. 13 - Market efficiency True or false? The...Ch. 13 - Prob. 2PSCh. 13 - Market efficiency Which (if any) of these...Ch. 13 - Prob. 4PSCh. 13 - Market efficiency How would you respond to the...Ch. 13 - Market efficiency Respond to the following...Ch. 13 - Prob. 7PSCh. 13 - Prob. 8PSCh. 13 - Market efficiency evidence Which of the following...Ch. 13 - Prob. 10PS
Ch. 13 - Prob. 11PSCh. 13 - Prob. 12PSCh. 13 - Market efficiency implications What does the...Ch. 13 - Prob. 14PSCh. 13 - Prob. 15PSCh. 13 - Abnormal returns Here are alphas and betas for...Ch. 13 - Prob. 18PSCh. 13 - Behavioral finance True or false? a. Most managers...Ch. 13 - Prob. 20PSCh. 13 - Prob. 21PSCh. 13 - Prob. 22PS
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