Corporate bonds are riskier than US Treasury, so they pay default risk premium over what Treasury pays to stay competitive in the market. True False
Q: What is the Debt Coverage Ratio assuming a $267,500 NOI/Cash Flow, a $3,500,000 loan with a 4.25%…
A: Data given: Net operating income = $267,500 Loan= $3,500,000 Interest rate=4.25% (compounded…
Q: • What rate of interest is earned on a non- redeemable term deposit that grows from $5000.00 to…
A: The term deposit is an investment that locks the money for a specific maturity and provides a fixed…
Q: A firm had credit sales of $15,750,000 last year and its days sales outstanding was 65 days. What…
A: Given, Credit sales = $15,750,000. Days sales outstanding = 65 days.
Q: How much can be accumulated for retirement if $2,000 is put aside at the end of each of the next 40…
A: The Future Value of an Ordinary Annuity refers to the concept which gives out the compounded or…
Q: Mortgage Details Principal Loan Length Interest Rate Monthly Payment A. $273.62 C. $340.48 $150,000…
A: Mortgage balance after 10 years = $109,446 Interest rate = 0.03 Interest in next payment = ?
Q: 14) A loan of $8000 is to be repaid with monthly payments for three years at 12% interest compounded…
A:
Q: When to replace an asset: Burt's Pizzas is considering whether to purchase an oven. Burt's…
A: When life of two mutually exclusive projects are different than NPV method does not give…
Q: 55. A trader submits an all-or-nothing, immediate-or-cancel [fill or kill] order to sell 800 shares…
A: As per Bartleby honor code, when multiple questions are asked, the expert is required only to solve…
Q: riel uses Payback method for capital budgeting. t = 0 cash flow of -$1050 followed with t=1 $400,…
A: Payback period is the period with in which initial investment is recovered. It means the time period…
Q: Suppose a bond that has semiannual coupons is selling for $10,500. It has 7 years left until…
A: A bond is a debt instrument used by companies to raise capital from investors. The investors loan…
Q: Lu deposits $124 at the end every three months into an account that earns 4.35% compounded monthly.…
A: The question is solved using Financial calculator. N= Number of years of deposits = 6.5 I/Y = 4.35%…
Q: It is October and Sam has won a price of $9000. She has the following two options: • Option A:…
A: The quantum and timing of cash flows differ under the two options. The winner has decided to choose…
Q: The credit card with the transactions described in the popup below uses the average daily balance…
A: Given, Monthly interest rate is 1.5%Previous balance is $2645.51
Q: George is working for FreshFruit Imports Ltd. The firm is going to pay a stock dividend by splitting…
A: A company issues stock dividend leading to increase in number of shares outstanding. We have to find…
Q: Self-Supporting Growth Rate Maggie's Muffins Bakery generated $2 million in sales during 2019, and…
A: concept. growth rate = (Profit margin×Retention ratio×Current sales)(Current total assets−Current…
Q: Noto Inc. just paid a dividend of $4.6 per share. Dividends are expected to grow at 6%, 5%, and 3%…
A: Dividend The portion of profit distributed by a company to its shareholders is known as a dividend.…
Q: he Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and…
A: The fair value of the policy depends on the interest rate and annual payment from the policy and…
Q: A four-stroke motorbike costs P75,000.00. It will have a salvage value of P10,000.00 when worn out…
A: Sinking fund method of depreciation With initial cost (C), salvage value (S), interest rate (r) and…
Q: The credit card with the transactions described in the popup below uses the average daily balance…
A: The average daily balance is to be computed by dividing the total amount by the number of days in…
Q: Strange Manufacturing Company is purchasing a production facility at a cost of $12 million. The…
A: Net Present Value is the difference between Present value of cashinflows and Present value of…
Q: Investigate the effect of the term on simple interest amortized auto loans by finding the monthly…
A: Given, The amount of loan is $13,000 Rate of interest is 8 7/8%
Q: Tier-1 capital: Refers to the best performing tier of bank assets. Consists mainly of shareholders…
A: Tier 1 capital is the main capital held in reserves of the bank and will be used for funding of…
Q: Mamadou is leasing a car originally valued at $42,130. The lease is being financed with an interest…
A: Given, The amount financed is $42,130 Interest rate is 7.87% Monthly payment is $466
Q: Exponential Decay) 4\ The value of a car declines exponentially at 7.5% per year. Find the…
A: Given: Interest rate = 7.5% Years = 4 Future value = OMR 14,816.36
Q: Cranny’s Inc. has EBIT of $3932.8 depreciation of $717.3, a tax rate of 0.35, a capital expenditure…
A: Free Cash Flows refers to the amount of cash that could be Used/withdrawn without harming a firm's…
Q: OUR PARENTS OBTAIN A 2021 MODEL OF TOYOTA FORTUNER FOR P1,500,000.00. THE AGREED PAYMENT IS 5 YEARS…
A: A person is not able to always afford buying a high priced thing like a car or a house. Such items…
Q: Seven months ago, Rosetta purchased a bond for $3,000. Initially, she calculated the bond would be…
A: Purchase price of Bond is $3000 Time period of Rossets bond is 7 months Equivalent rate for 8 months…
Q: thousand pesos is deposited at the end of each year for 15 years into an account earning 7.5%…
A: The compounding continously is logarithmic method of compounding of interest but this is imaginary…
Q: The contract size for platinum futures is 50 troy ounces. Suppose you need 500 troy ounces of…
A: We have to take a position in the futures of platinum. We have to then determine the profit (loss)…
Q: 4. You are saving up for a cruise after graduation. The cruise will cost $1,500. How much must your…
A: Information Provided: Cruise cost (Future value) = $1500 Period = 19 months Interest rate = 2%…
Q: Suppose Hardmon borrows to the point that its debt-equity ratio is 0.50. With this amount of debt,…
A: Information Provided: Expected return (all equity) = 18.30% Debt-Equity ratio = 0.50 Debt cost of…
Q: Compute the cash conversion cycle for both years. Round answers to one decimal place.
A: Information Provided: 2015 Data: Days sales outstanding = 25.9 Days inventory outstanding = 47.5…
Q: In the unrealistic situion in which the cost of capital were zero, the NPV of the project
A: Data given: Cost of capital = 0 Required: NPV of the project
Q: Beryl's Iced Tea currently rents a bottling machine for $54,000 per year, including all maintenance…
A: The NPV of a project is used to find out the profitability of the project by discounting future cash…
Q: Tom was trying to determine the best way to save for his retirement. He was selecting between two…
A: We need to use future value of annuity formula to calculate value of money at retirement.…
Q: In analyzing the financial statements which are given can you please compute the following ratios:…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Find the value of the ordinary annuity at the end of the indicated time period. The payment R,…
A: The ordinary annuity means a series of equal payments made at regular intervals at the end of the…
Q: 1. Will Stephanie have enough funds for her investment in stocks and bonds, when needed? What will…
A: Given: Bank interest rate = 6% Amount is deposited in fixed deposit
Q: 2.A hospital has the following cost and utilization information Overhead cost: Maintenance…
A: Average cost is total cost divided by number of units where costs are allocated.
Q: Year Earnings and FCF Forecast ($ million) 1 Sales 2 Growth vs. Prior Year 3 Cost of Goods Sold 4…
A: Calculation of stock and change in value of stock.
Q: CNN reported that higher-income shoppers are the biggest bargain shoppers searching Amazon, clicking…
A: Straight Line Depreciation = (Cost of the Asset- Residual Value)/Number of useful life Book Value of…
Q: Darlene wishes to purchase 200 shares of The-Smart-One Inc. in 4 years from now. The-Smart-One paid…
A: Given , The dividend paid last year is $2.25 Growth rate is 2% for first 2 years Required rate is 6%
Q: Which of the following statements are TRUE in relation to a “Bail-in” of a failing bank? Existing…
A: Bail-in refers to the facility that is providing relief to financial institutions by canceling…
Q: Do the stock and bond investments fall within Stephanie’s investment guidelines? Show appropriate…
A: Particulars Pan Elixir Rebound Cheers Think local Last year dividend $2.50 $0.50 $1.00 $0.75…
Q: Pamela made a profit of $3250 after selling stocks for $10500 after 4 years. What was her average…
A: Profit (P) = $3,250 Sale price (SP) = $10,500 Period (n) = 4 Years First we will calculate purchase…
Q: You complete a runs test on daily data for a thinly traded stock and the Z statistic is -5.13. If…
A: Solution: 5. Take neither a long or short position in the stock. Explanation: The Z statistic…
Q: eBook The real risk-free rate is 2.25%. Inflation is expected to be 3.25% this year, 4.95% next…
A: Yield to maturity, The total rate of return a bond is expected to receive when it matures, that is,…
Q: company is considering taking a project that will produce $12 million of revenue per year. Cash…
A: Revenue = $12 million Cash expenses = $5 million Depreciation expenses = $1 million Decrease in…
Q: Your company paid a dividend of $2 last year. The growth rate is expected to be 20 percent for 1…
A: Current dividend (D0) = $2 Growth rate for year 1 = 20% Growth rate for year 2 = 17% Growth rate…
Q: alculate the rent of an annuity at 4% compounded semiannually if payments are made every half year…
A: To calculate the rent of an annuity we will use the below formula Rent of an annuity =…
-
Corporate bonds are riskier than US Treasury, so they pay default risk premium over what Treasury pays to stay competitive in the market.
True
False
Step by step
Solved in 3 steps
- 1. When the Fed purchases treasuries to supply market liquidity, does that increase, decrease, or have no effect on the credit spread for a corporate bond?A corporate bond's return becomes less uncertain as default risk increases. True or False. Explain your answerDoes governance of firms affect the prices of their bonds?Point: No. Bond prices are primarily determined by interest rate movements and therefore are not affected by the governance of firms that issue the bonds.Counter-Point: Yes. Bond prices reflect the risk of default. Firms with more effective governance may be able to reduce their default risk and thereby increase the prices of their bonds.Who is correct?
- Which of the following is most correct? Treasury bonds carry high default risk because government has the option not to pay its indebtedness. Corporate bonds have lower interest rates compared with treasury bonds because bonds were issued with the aid of financial intermediaries. Corporate bonds have no default risk because they are backed by their corporate assets. Treasury bonds have lower interest rates because they are assumed to carry no default risk.Which of the following statements is TRUE? O The demand for a bond declines when it becomes less liquid, decreasing the interest rate spread between it and relatively more liquid bonds. O The corporate bond market is the most liquid bond market. O The differences in bond interest rates reflect differences in default risk only. O A liquid asset is one that can be quickly and cheaply converted into cash.1. When market volatility increases, does that increase, decrease, or have no effect on the credit spread of a corporate bond?
- Which of the following statements is CORRECT? a. Convertible bonds generally have lower coupon rates than non-convertible bonds of similar default risk because they offer the possibility of capital gains. b. A debenture is a secured bond that is backed by some or all of the firm's fixed assets. c. Junk bonds typically provide a lower yield to maturity than investment-grade bonds. d. A company's subordinated debt has less default risk than its senior debt. e. Senior debt is debt that has been more recently issued, and in bankruptcy it is paid off after junior debt because the junior debt was issued first.Why are the bonds treated as a conservative investment? Do you think the treasury bills are risk-free assets?1. Types of bonds Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. A. Which of the following statements about Treasury bonds is the most accurate? Treasury bonds have a very small amount of default risk, so they are not completely riskless. Treasury bonds are completely riskless. Treasury bonds are not completely riskless, since their prices will decline when interest rates rise. B. Based on the information given in the following statement, answer the questions that follow: In July 2009, Hungary successfully issued 1 billion euros in bonds. The transaction was managed by Citigroup. Who is the issuer of the bonds? The Hungarian government Hungary Bank Citigroup C. What type of bonds are these? Municipal bonds Corporate bonds Government bonds
- 1. Types of bonds Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. Which of the following statements about Treasury bonds is the most accurate? O Treasury bonds have a very small amount of default risk, so they are not completely riskless. O Treasury bonds are completely riskless. O Treasury bonds are not completely riskless, since their prices will decline when interest rates rise. Based on the information given in the following statement, answer the questions that follow: In July 2009, Walmart sold 100 billion yen of five-year samurai bonds. Lead managers in the deal were Mizuho Securities, BNP Paribas, and Mitsubishi UFJ Securities. Who is the issuer of the bonds? O Mitsubishi UFJ Securities O BNP Paribas O Walmart What type of bonds are these? O Corporate bonds O Municipal bonds O Government bonds O OA bond trader observes the following information:• The Treasury yield curve is downward sloping.• Empirical data indicate that a positive maturity risk premium applies to both Treasury and corporate bonds.• Empirical data also indicate that there is no liquidity premium for Treasury securities but that a positive liquidity premium is built into corporate bond yields.On the basis of this information, which of the following statements is most CORRECT? a. The corporate yield curve must be flat. b. Since the Treasury yield curve is downward sloping, the corporate yield curve must also be downward sloping. c. A 10-year Treasury bond must have a higher yield than a 10-year corporate bond. d. A 10-year corporate bond must have a higher yield than a 5-year Treasury bond. e. A 5-year corporate bond must have a higher yield than a 10-year Treasury bond.One reason why short- term Corporate yield curves are higher than that of short-term Treasury securities, is that short-term O Corporate securities have a maturity risk premlum. O Treasury securities have a lower maturity risk premlum than that of Corporate securities O Corporate securities have a higher maturity risk premlum than that of Treasury securities O Treasury securities have no liquidity premlum. O Treasury securities have no maturity risk premium.