The return on 1 year zero coupon bond and 4 t h year zero coupon bond, supposing that the term structure will be same as now. Introduction: Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

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Answer 1

Question

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions Assumptions Discount rate (WACC) Common shares outstanding 7.60% 5,029.00 million Net nonoperating obligations (NNO) $(8,747) million NNO is negative, which means that Cisco has net nonoperating investments CSCO ($ millions) DCF Model Reported 2019 Forecast Horizon 2020 Est. 2021 Est. 2022 Est. 2023 Est. Terminal Period Increase in NOA FCFF (NOPAT - Increase in NOA) $ 1241 1303 1368 10673 11207 11767 1437 $ 12354 302 ✓ Present value of horizon FCFF 9918 9679 9445 ✔ 0 × Cum. present value of horizon FCFF $ 0 × Present value of terminal FCFF 0 ☑ Total firm value 0 ☑ NNO -8747 ✓ Firm equity value $ 0 ☑ Shares outstanding (millions) 5029 Stock price per share $ 40.05

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Answer 2

Question

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

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Answer 3

Question

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

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Answer 4

Question

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

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Answer 5

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

Answer 6

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

Answer 7

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

Answer 8

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

Answer 9

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

Answer 10

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

Answer 11

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 15 - Prob. 1PS Ch. 15 - Prob. 2PS Ch. 15 - Prob. 3PS Ch. 15 - Prob. 4PS Ch. 15 - Prob. 5PS Ch. 15 - Prob. 6PS Ch. 15 - Prob. 7PS Ch. 15 - Prob. 8PS Ch. 15 - Prob. 9PS Ch. 15 - Prob. 10PS

Solution Summary: The author calculates the rate of return for 1-year bond and 4-year coupon bond, assuming the term structure will be the same as now.

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