Consider a long position in a 6-month forward contract on a 1-year coupon bond with a 8% quarterly coupon. (Note: The bond has 1-year to maturity as of t=0). Assume a face value of $1 million. Use the discount factors for August 15, 2000 in Table 5.9 to find the forward price at t=0. Assume …

# Month: April 2017

Find the value of American Call option with an exercise price of $150 and a stock price of $145. The stock can go up by 12% and down by 18% in each of the two binomial periods. The risk free rate is 3%. Determine the price of option today using two period binomial option pricing …

What is the value today of a 15-year annuity that pays $650 a year? The annuity�s first payment occurs six years from today. The annual interest rate is 11 percent for Years 1 through 5, and 13 percent thereafter.(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

1.A business borrows $296,926 for 9 years at an annual rate of interest of 6%. If payments are annual and the loan will negatively amortize by $49,469, what will be the annual payment required?2.What is the present value of a perpetuity making quarterly payments in arrears in the amount of $8,054 per quarter, and the …

The heat loss through the exterior walls of a certain poultry processing plant is estimated to cost the owner $2,800 next year. A salesman from Superfiber Insulation, Inc., has told you, the plant engineer, that he can reduce the heat loss by 80% with the installation of $17,500 worth of Superfiber now. If the cost …

Investment A has the following cash flows: 200,200,300,200 200Investment B has the following cash flows: 300,300,300,300,300Both investments have a cost of 350 initially. Indicate which registers, financial or cash flow, can be used to determine the IRR of each investmentA’s IRR can be determined with either financial or cash flow registers; B’s IRR with only …

Otobai Company in Osaka, Japan is considering the introduction of an electrically powered motor scooter for city use. The scooter project requires an initial investment of �16.8 billion. The cost of capital was assumed to be 9%. The initial investment can be depreciated on a straight-line basis over the 10-year period, and profits are taxed …

You decide to open an individual retirement account (IRA) at your local bank that pays 11%/year/year. At the end of each of the next 40 years, you will deposit $4,000 per year into the account (40 total deposits). 3 years after the last deposit, you will begin making annual withdrawals. If you want the account …

XYZ has a $1,000 Face Value 5% Coupon Bond (paid semi-annually). The bond is selling for $949 today and matures in 8 years. (The YTM today is 5.8%) A) What will be the price of the bond in 1 year if the YTM investors demand is still 5.8%? $_________? B) What will be the price …

22) California Retailing Inc. has sales of $4,000,000; the firm’s cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm’s interest expense is $250,000, and the corporate tax rate is 40%. What is California Retailing’s net income?A) $288,000B) $350,000C) $377,000D) $390,000