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22 Nov
2020

# Calculate decimals to four places. 16. Dry Dock Boats Incorporated has bonds outstanding which…

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Calculate decimals to four places. 16. Dry Dock Boats Incorporated has bonds outstanding which will mature in 12 years. Thebonds pay a 12 percent semiannual coupon and have a face value of \$1,000. The bonds currently havea yield to maturity of 10 percent. The bonds are callable in 8 years and have a 5% call premium.What’s the bonds’ YTC?a. 8.89%b. 9.89%c. 9.94%d. 10.00%e. 12.00%
A trader sells a strangle by selling a 6-month European call option with a strike price of \$50 for \$3
A trader sells a strangle by selling a 6-month European call option with a strike price of \$50 for \$3 and selling a 6-month European put option with a strike price of \$40 for \$4. For what range of prices of the underlying asset in 6 months does the trader make a profit?
A dealer predicts that a current 180-day Treasury bill which costs \$98 per \$100 dollars of face will increase in
A dealer predicts that a current 180-day Treasury bill which costs \$98 per \$100 dollars of face will increase in price by one hundredth of one percent in two days. What is highest two-day repo rate he can pay and still expect to break even? Show any calculations
4. About bonds: a. What is a low-coupon bond? b. Does having a low coupon bond make the dollar price
4. About bonds: a. What is a low-coupon bond? b. Does having a low coupon bond make the dollar price more volatile? Explain. c. In what sense does having a low coupon make a bond price more volatile? Explain. d. What is the effect of “callability” on the yield of a bond? Explain.
1Check all that apply: What are your strategies to earn arbitrage profit if any? select ALL applicable strategies. A.
After-Tax Yield You need to choose between investing in a one-year municipal bond with a 7 per- cent yield and
After-Tax Yield You need to choose between investing in a one-year municipal bond with a 7 per- cent yield and a one-year corporate bond with an 11 percent yield. If your marginal federal income tax rate is 30 percent and no other differences exist between these two securities, which would you invest in?
-Camila plans to go for vacation to Australia in 9 years from now. She estimates that she will need
-Camila plans to go for vacation to Australia in 9 years from now. She estimates that she will need \$28,778 for the trip. How much does she need to place in a saving account today that earns 8.10 percent per year (compounded quarterly) to accumulate this amount?
There are two states of the world tomorrow. With probability 1/5, the economy will be good. With probability 4/5, the
There are two states of the world tomorrow. With probability 1/5, the economy will be good. With probability 4/5, the economy will be bad. IBM stock return will be 15% if the economy is good, -5% if the economy is bad. Dell stock return will be 20% if the economy is good, −10% if the economy is bad. You own \$1,500 of IBM and \$1,500 of Dell.a. What is the expected return of your portfolio?b. What arethe covariance of IBM and Dell stock returns? c. What isthe variance of your portfolio?
1. Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may
1. Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: \$150 million, \$135 million, \$95 million, and \$80 million. These outcomes are all equally likely, and this risk is diversifiable. Gladstone will not make any payouts to investors during next year. Suppose the risk-free interest rate is 5%. Assume there are no taxes. -What is the initial value of Gladstone’s equity without leverage?Now assume Gladstone has zero-coupon debt with a \$100 million face value due next year. -What is the initial value of Gladstone’s debt? -What is the yield-to-maturity of the debt? What is the expected return?What is the initial value of Gladstone’s equity? What is Gladstone’s total value with leverage?
Adams Enterprises, Inc. is considering the purchase of a new manufacturing facility for \$110m. The facility is expected to be
Adams Enterprises, Inc. is considering the purchase of a new manufacturing facility for \$110m. The facility is expected to be in operations for seven years, after which it will be shut down. The facility will be fully depreciated on a straight-line basis over seven years, and it will have no resale value. Revenues from the facility are expected to be \$50m at the end of the first year, and are expected to increase at the rate of 5 percent per year. Production costs at the end of the first year will be \$20m and they are expected to increase at 7% per year. The discount rate is 14%. Adams, Inc. has other ongoing, profitable operations, and it will be fully taxable for the profits generated by the new production facility. The corporate tax rate is 34%. Should the company accept the project?

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