
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Commercial papers issued by the corporations:
carry an interest rate that changes according to the firm's level of risk.
all of them
are mostly issued by the largest and most creditworthy corporations, as they are unsecured.
maximum maturity is 270 days
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- A bank has assets of $500,000,000 and equity of $40,000,000. The assets have an average duration of 5.5 years, and the liabilities have an average duration of 2.5 years. An 8-year fixed-rate T-bond with the same coupon as the fixed-rate on the swap has a duration of 6 years, and the duration of a floating-rate bond that reprices annually is one year. The bank wishes to hedge its balance sheet with swap contracts that have notional contracts of $100,000. What is the optimal number of swap contracts into which the bank should enter? 2,500 contracts. 2,760 contracts. 13,800 contracts. 3,200 contracts. None of the above.arrow_forwardSuppose a company is choosing between bank loans and bonds. The interest rate in the bank loan is 3.5%, and an investment bank predicted that the company will pay close to 4% to issue a bond with the same maturity. In addition, fees are estimated to be higher for the bond issuance than for the bank loan. Explain why this company may still decide to issue the bond rather than borrowing through a bank.arrow_forwardIf a company issues $15,000,00 worth of bonds with a face interest rate equal to the market interest rate, the bonds will sell at an amount Group of answer choices A)less than $15,000,000. b)equal to $15,000,000. C)greater than $15,000,000. D)that can’t be determined from the information provided in the problem.arrow_forward
- when are corporations likely they called the Bonds? A. When the market interest rate is higher than the contract rate, b. When the contract rate is higher than the market rate. C. When their bonds at selling at par with market d. When standard and poor are bullish about treasury bills E. None of the abovearrow_forwardWhen firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,907,570,000 and current liabilities of $1,362,550,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal? Question content area bottom Part 1 a. What is the firm's…arrow_forwardThe time value of money is used in calculating bond prices because: Group of answer choices A - The company might choose to repay the bonds prior to their maturity date B - Bond investors receive future payments and purchase bonds with current dollars C - The amount to be repaid at maturity will change as market rates change D - Cash interest payments to bondholders will change as market rates changearrow_forward
- 9arrow_forwardLoptech, a technology firm, wants to issue bonds for investment purposes. Loptech has one of the best credit ratings in the industry. Market rates for debt instruments average at .5% interest. Based on its credit rating, Loptech would likely sell bonds that pay _____. A. Indeterminable with current information B. 0.25% C. 0.5% D. 0.75%arrow_forwardAssume you deposit $4,400 at the end of each year into an account paying 10.5 percent interest. a. How much money will you have in the account in 24 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. How much will you have if you make deposits for 48 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)arrow_forward
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