EBK FOUNDATIONS OF FINANCE
EBK FOUNDATIONS OF FINANCE
10th Edition
ISBN: 9780135160473
Author: KEOWN
Publisher: PEARSON CO
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Chapter 17, Problem 1SP

a)

Summary Introduction

To determine: The reduction in check collection time required for company P not either better or worse for adopted lockbox system.

b)

Summary Introduction

To determine: The change in part a) when the company invest at 4% annual return.

c)

Summary Introduction

To discuss: The difference among part a) and part b).

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Consider the following two bonds:     Bond A Bond B Face value $1,000 $1,000 Coupon rate (annual) 8% 8% YTM 9% 7% Maturity 10 years 10 years Price (PV) ? ?   Calculate the price for each bond. What is the primary factor affecting the prices of the bonds? Indicate which bond is premium and which one is discount. Is there any relationship between the YTM and the coupon rate in case of premium/discount bonds? Now, consider the following two bonds:     Bond X Bond Y Face value $1,000 $1,000 Coupon rate (annual) 8% 8% YTM 11% 11% Maturity 5 years 10 years Price (PV) ? ?   Calculate the price for each bond. What is the relationship between bond price and maturity, all else equal?   A bond with a par value of $1,000 and a maturity of 8 years is selling for $925. If the annual coupon rate is 7%, what’s the yield on the bond? What would be the yield if the bond had semiannual payments?…
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