Consider information on the following bonds (with face value 100): Bond Maturity (years) Coupon rate Yield-to-maturity A 1 0% 5.0% В 2 5% 5.5% C 3 6% 6.0% Coupons are paid annually. What is the three-year spot interest rate?

Q: Explain Briefly these five methods of dealing with risks. the risk may be avoided the risk may be r...

A: The act of discovering, analyzing, and subjugating these risks is known as pure risk management, and...

Q: Assume inflation is 0.16% per month. Would you rather earn a nominal return of 0.79% per month, comp...

A: Annual rate of return = (1 + monthly return)12 - 1

Q: Compute for the: 1.) Call Option - Total Value 2.) Call Option - Intrinsic Value 3.) Call Option ...

A: The question is based on the concept of valuation of an option contract.  Total value is the market ...

Q: You are looking to buy a car and you have been offered a loan with an APR of 6.2%, compounded monthl...

A: APR = 6.2% monthly compounded  

Q: Russ and Roz Rosow have a ten-year-old loan with which they purchased their house. Their interest ra...

A: (Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the questio...

Q: What is the amount of compensating balance would be required for a nominal interest rate of 12% to e...

A: Borrowings are the loan which is taken by the individual to meet its financial requirements. The mor...

Q: The W.A.C.C. is a :  a Composite opportunity cost metric  b Simple opportunity cost metric  c Risk-...

A: The overall cost of capital, also known as the Weighted average cost of capital (WACC), is the minim...

Q: Use the ordinary interest method to compute the time (in days) for the loan. Round your answer up to...

A: Given Principal is $7100 Rate is 10.4% Interest $225.

Q: You want to be able to withdraw $35,000 from your account each year for 20 years after you retire. Y...

A: Solution:- When an equal amount is withdrawn or deposited each period for a number of periods, it is...

Q: OPTIONAL: D1 Numerator OPTIONAL: D1 Denominator OPTIONAL: D1

A: Option is a type of derivative security as its value depends on the underlying security. The value o...

Q: Zac has a current wealth of £400. He gets an email offering him the chance to enter a prize draw tha...

A: The minimum amount that a person is willing to accept for a good or service is called willingness to...

Q: Your firm has taken out a $480,000 loan with 8.1% APR (compounded monthly) for some commercial prope...

A: The loans are paid the monthly payments that carry the payment for interest and the payment for the ...

Q: 200,000, a fast food corporation may purchase the building and land required to open a new shop. Ins...

A: The monthly payment are done considering the interest and value of the building and value of buildin...

Q: A delivery company is evaluating an investment to purchase vehicles. This is expected to generate a ...

A: we can calculate the present value of the cash flow using the discount rate 10%. We will multiply th...

Q: Which of the following is NOT an effect of the possibility of bankruptcy? O reduce the possible payo...

A: Interest rate on debt are fixed in nature but decided with rating of company. The interest rate are ...

Q: Bulldogs Inc. uses Additional Funds Needed as a plug item. If the company had forecast its additiona...

A: The retention ratio is calculated as ratio of retained earnings and net income for the year

Q: Bulldogs Inc. deals with various clients throughout the city and is attempting to collect its accoun...

A: Let's find the interest amount first Interest rate (r) = 8%

Q: Bulldogs Inc. loaned a certain amount from a reputable bank for a term of one year at 8% quoted rate...

A: Principal = P 415000 Principal - Compensating balance = P 375000 Nominal interest rate = 8%

Q: Preferred stocks are characterized by all the following, except a. the dividends declared for the i...

A: Preferred stocks have different features in comparison to common stocks of the company. These have b...

Q: Bulldogs Inc. offered a one-year loan to a customer client. The instrument is a discounted note with...

A: Discount rate (DR) = 15%

Q: Assume you graduate from college with $26,000 in student loans. If your interest rate is fixed at 5....

A: Loan amount (X) = $26000 r = 5% per annum = 5%/12 = 0.4167% per month n = 10 years = 120 months Let ...

Q: 2021 MARKET  DATA Market Price $193.42 Shares Outstanding (M) 13.7 Tax Rate 18.80% What is S...

A: Capital expenditure (or capex) is the amount spent in buying new plants, equipment and machinery.

Q: Correlations change over time. Assets more strongly positively correlated wh market crashes, and les...

A: A portfolio is a collection of financial assets such as stocks, bonds, commodities, cash and cash eq...

Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a...

A: To Find: Sharpe ratio of best feasible CAL

Q: Find the Present Value of the Cash Flow 1 and, using this and the previous information, calculate th...

A: The value of money changes over time. For example, the value of $1000 today will not be the same as ...

Q: how does being unethical in the financial industry affect communication with clients?

A: In the financial services industry an agent or the concerned company (which is the financial service...

Q: NEKO Inc. has forecasted that its net income will be P520,000. The company has an debt-to-equity rat...

A: Debt to equity ratio = 25% Funding amount = P 600000

Q: Bulldogs Inc., a corporation that can only legally issue ordinary shares with par value, recently co...

A: Share price: Share price is the current market price of the share. It is the price of the share at w...

Q: Levine, Inc., has an ROA of 7.7 percent and a payout ratio of 27 percent.   What is its internal gro...

A: Growth rate = ROA*Retention ratio Where ROA = Return on assets or investment i.e. 7.7% Retention rat...

Q: Allen Inc. took out a 1-year, 8%, $100,000 loan on March 31, 2018. Interest is due upon maturity of ...

A: Solution:- When an amount is borrowed, the lender charges interest on it and at the maturity, princi...

Q: Which do you prefer: a bank account that pays 5.5% per year (EAR) for three years or a. An account t...

A: Current EAR is 5.5% per year Time Period is 3 years Case-a: When interest rate is 2.8% every six mon...

Q: Barry has applied for a loan in the amount of $10,500. A bank figures that Barry will repay the loan...

A: Loan amount = $10500 Probability of repayment = 0.93 Probability of default = 0.07 Let the interest ...

Q: Inc. expects to use 48,000 boxes of chocolate per year costing P12 per box. Inventory carrying cost ...

A: Solution:- Carrying cost of inventory means the holding cost of inventory paid in order to store and...

Q: What is the future value of $1,540 invested for 5 years at 5% interest compounded monthly? Round you...

A:

Q: High-end airlines compete directly with other high-end airlines. When it comes to pricing, competito...

A: In a competitive environment, the companies will try to outdo each other on prices and services in o...

Q: TNT Construction borrowed $150,000 at 7.26% compounded annually and signed a contract with the provi...

A: Solution:- When an amount is borrowed, the borrower has the option whether to repay it in lump sum o...

Q: The Hershey Company is planning on releasing a new line of gluten-free candy products. New equipment...

A: Tax rate is 21% To Find: Incremental cash flow in year-2

Q: Question 3 Steady As She Goes Inc. will pay a year-end dividend of $3 per share. Investors expect th...

A:

Q: Suppose the interest rate is 7.7% APR with monthly compounding. What is the present value of an annu...

A: Interest rate = 7.7% Monthly interest rate = 7.7%/12 = 0.641666666666667% Three monthly payment  = $...

Q: Bridgette Inc. maintains a cash buffer for unexpected cash outlays for the year amounting to 3,000. ...

A: Unexpected annual cash outlay is 3,000 Transaction cost per transaction is P15 Annual interest rate ...

Q: You have just sold your house for $900,000 in cash. Your mortgage was originally a 30-year mortgage ...

A: Amortized Loan:  Amortized loan is a type of loan in which the borrower would pay periodic payments ...

Q: You are planning to retire in 25 years time. Immediately after your retirement, you wish to go for a...

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only on...

Q: McCabe Corporation is expected to pay the following dividends over the next four years: $15, $11, $9...

A: D1 = $15 D2 = $11 D3 = $9 D4 = $2.95 D5 = D4(1 + g) = $2.95(1 + 0.04) = $3.068 Required Return, r = ...

Q: Suppose an investor plans to make monthly deposits into an account that pays 9% interest, compounded...

A: We will first calculate the amount needed to pay on a monthly basis so we will take the period as 12...

Q: Regarding the trade-off theory, capital structure is a trade-off between: O tangible and intangible ...

A: The capital structure refers to the mix of various available sources of capital which is used by a f...

Q: A school service van is available for purchase at P23,000 bimonthly. The first payment is due at the...

A: Bimonthly payment = P23000 Interest rate = 14% Bimonthly interest rate = 14%/6 = 2.33333333333% Numb...

Q: Biarritz Corp. is growing quickly. Dividends are expected to grow at a rate of 31 percent for the ne...

A: Current dividend = $1.75 Required return = 12% Future dividends Year Last dividend Growth rate Di...

Q: State whether the Portfolio Nature is Defensive/Aggressive. Weight on XOM Weight on PFE Portfolio R...

A: A defensive portfolio is made up of equities that have a low beta. The equities in this portfolio ar...

Q: You are constructing a simple portfolio using two stocks A and B. Both have the same expected return...

A:

Q: Lia plans to buy a house for Php 158482. She wants to make a down payment of Php 23912 and to take o...

A: Price of house = Php 158,482 Down payment = Php 23,912 Loan amount = 158,482-23,912 = Php 134,570.00...

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like: