Gen Combo Looseleaf Principles Of Corporate Finance With Connect Access Card
13th Edition
ISBN: 9781260695991
Author: Richard A Brealey
Publisher: McGraw-Hill Education
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Chapter 3, Problem 19PS
Spot interest rates and yields Look again at Table 3.6. Suppose the spot interest rates change to the following downward-sloping term structure:
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Wildcat, Incorporated, has estimated sales (in millions) for the next four quarters as follows:
Q1
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Q3
Sales $ 195 $ 215 $ 235
Q4
$ 265
Sales for the first quarter of the following year are projected at $210 million. Accounts receivable at the
beginning of the year were $83 million. Wildcat has a 45-day collection period.
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suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 20 percent of sales.
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Wildcat plans a major capital outlay in the second quarter of $98 million. Finally, the company started the year
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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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Chapter 3 Solutions
Gen Combo Looseleaf Principles Of Corporate Finance With Connect Access Card
Ch. 3 - (PRICE) In February 2009, Treasury 8.5s of 2020...Ch. 3 - (YLD) On the same day, Treasury 3.5s of 2018 were...Ch. 3 - (DURATION) What was the duration of the Treasury...Ch. 3 - (MDURATION) What was the modified duration of the...Ch. 3 - Bond prices and yields A 10-year bond is issued...Ch. 3 - Bond prices and yields The following statements...Ch. 3 - Bond prices and yields Construct some simple...Ch. 3 - Bond prices and yields A 10-year German government...Ch. 3 - Bond prices and yields A 10-year German government...Ch. 3 - Bond prices and yields A 10-year U.S. Treasury...
Ch. 3 - Bond returns If a bonds yield to maturity does not...Ch. 3 - Bond returns a. An 8%, five-year bond yields 6%....Ch. 3 - Prob. 10PSCh. 3 - Duration True or false? Explain. a....Ch. 3 - Duration Here are the prices of three bonds with...Ch. 3 - Duration Calculate the durations and volatilities...Ch. 3 - Prob. 14PSCh. 3 - Duration Find the spreadsheet for Table 3.4 in...Ch. 3 - Prob. 16PSCh. 3 - Spot interest rates and yields Which comes first...Ch. 3 - Prob. 18PSCh. 3 - Spot interest rates and yields Look again at Table...Ch. 3 - Prob. 20PSCh. 3 - Spot interest rates and yields Assume annual...Ch. 3 - Spot interest rates and yields A 6% six-year bond...Ch. 3 - Spot interest rates and yields Is the yield on...Ch. 3 - Prob. 24PSCh. 3 - Measuring term structure The following table shows...Ch. 3 - Term-structure theories The one-year spot interest...Ch. 3 - Term-structure theories Look again at the spot...Ch. 3 - Real interest rates The two-year interest rate is...Ch. 3 - Prob. 30PSCh. 3 - Bond ratings A bonds credit rating provides a...Ch. 3 - Prob. 32PSCh. 3 - Price and spot interest rates Find the arbitrage...Ch. 3 - Prob. 34PSCh. 3 - Prices and spot interest rates What spot interest...Ch. 3 - Prices and spot interest rates Look one more time...
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