week 3 Problems
5 Pages

week 3 Problems

Course Number: BUSN 379, Spring 2011

College/University: DeVry NY

Word Count: 967

Rating:

Document Preview

Problem #3, Lycan, Inc. has 7 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual payment. If the YTM on these bonds is 9 percent, what is the current bond price? The price any is any bond is the PV of the interest, Plus the PV of the par value. The problem assumes an annual coupon. The price of the bond will be: P=$70({1-[1/(1+0.07)]8}/.09)+$1,000[1/(1+.09)8] P=2302.066 We...

Unformatted Document Excerpt
Coursehero >> New York >> DeVry NY >> BUSN 379

Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Course Hero has millions of student submitted documents similar to the one below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

#3, Problem Lycan, Inc. has 7 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual payment. If the YTM on these bonds is 9 percent, what is the current bond price? The price any is any bond is the PV of the interest, Plus the PV of the par value. The problem assumes an annual coupon. The price of the bond will be: P=$70({1-[1/(1+0.07)]8}/.09)+$1,000[1/(1+.09)8] P=2302.066 We would like to introduce shorthand notation here. Rather than write ( or type, as the case may be ) the entire equation for the PV of a lump sum, or the PVA equation, it is common to abbreviate the equation as: PVIFAR, t= ({1-1[1/(1+r)]t}/r) Which stands for Present Value Interest Factor of an Annuity? These abbreviation are shorthand notation for the equation in which the interest rate and the number of period are substituted into the equation and solved. We will use this shorthand notation in the remainder of the solution key. The bond price equation for this problem would be: P=$70(PVIFA7%, 8) + $1,000(PVIF7%, 8) P=$889.30 #5, Coupon Rates. Merton Enterprises has bonds on the market making annual payment, with 16 years to maturity, and selling for $963. At this price, the bonds yield 7.5 percent. What must the coupon rate be on Mertons bonds? Here we need to find the coupon the coupon rate of the bond. All we need to do is to set up the bond pricing equation and solve for the coupon payment as follows: P=$963= C x(PVIFA7.5%, 16)+$1,000x (PVIF7.5%.16) Solving for the coupon payment, we get: C=$71 The coupon payment is the coupon rate times par value. Using this relationship, we get: Coupon rate=$71/$1,000 Coupon rate=.0710 or 7.10% #7 on page 196 Night Hawk Co. issued 15-year bonds two years ago at a coupon rate8.4 percent. The bonds make semiannual payments. If these bonds currently sell for 108 percent of par value, what is the YTM? Here, we are finding the YTM of a semi-annual coupon. The bond price equation is: P=$960=$42x (PVIFAR%, 26) +$1,000x (PVIFR%, 26) Since we cannot solve the equation directly for R, using a spreadsheet, a financial calculator, or trial and terror, we find: R=4.463% Since the coupon payments are semi-annual, this is the semi-annual interest rate. The YTM is the APR of the bond, so: YTM=24,463% YTM=7.43% Problem #9 on page 197 Calculating real rates of return If treasury bills are currently paying 5.7percent and the inflation rate is 2.9 percent, what is the approximate real rate of interest? The exact real rate? The approximate relationship between nominal interest rates(R), real interest rate(r), and inflation (h), is: R=r+h Approximate r=.057-.029 Approximate r=0.028 or 2.8% The fisher equation, which shows the exact relationship between nominal interest rates, real interest rates, and inflation is : (1+R)=(1+r)x(1+h) (1+.08)=(1+r)x(1+.047) Exact r = [1+.057)/(1+.029)]-1 Exact r=0.027211 or 2.7% Problems #1, Stock Values Patience Inc., just paid a dividend 2.35 of per share its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. If investors require an 11 percent return on this stock. What is the current price? What will the price be in three years? In 15 years? The constant dividend growth model is : Pt=Dt(1+g)/(R-g) So, the price of the stock today is : P0=D0(1+g)/(R-g) P0=$2.35(1.045)/(0.11-0.045) P0=$37.78077 The dividend at year 4 is the dividend today times the FVIF for the growth rate in dividends and four years, so : P3=D3(1+g)/(R-g) P3=D0(1+g)^4/(R-g) P3=$2.35(1.045)^4/(0.11-0.045) P3=$43.11413 We can do the same thing to find the dividend in year 16, which gives us the price in year 15, so: P15=D15(1+g)/(R-g) P15=D0(1+g)^16/(R-g) P15=$2.35(1.045)^16/(0.11-0.045) P15=$73.11646 #3, Stock Values The next dividend payment by Mosby, Inc., will be $2.45 per share. The dividend are anticipated to maintain a 5.5 growth rate , Forever . If the stock currently sells for $45.50 per share, what is the required return? We need to find the required return of the stock. Using the constant growth model we can solve the equation for R. Doing so. We find : R: (D1/P0)+g R=($2.45/45.5)+0.055 R= 0.108846 or 10.88% For the company in the previous problem. What is the dividend yield? What is expected capital gain yield? The dividend yield is the dividend next year divided by the current price, so the dividend yield is: Dividend yield =D1/P0 Dividend yield=$2.45/$45.5 Dividend yield = 0.053846 or 5.38% The capital gains yield, or percentage increase in the stock price, is the same as the dividend growth rate, so: Capital gains yield =5.5% #5 on page 225 Stock Valuation. Bruer, Inc., is expected to maintain a constant 5.8 percent growth rate in its dividend, indefinitely. If the company has a dividend yield of 4.3 percent. What is the required return on the stock today? The required return of a stock is made up of two parts : The dividend yield and the capital gains yield. So the required return on this stock is: R= Dividend yield +Capital gains yield R= 0.043+0.058 R=0.101 or 10.1% Problem #11 on page 226 Valuing preferred Stock E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not paid until 20 years from today. If you require a 7 percent return on this stock, how much should you pay today? Here, we have a stock that pays no dividends for 20 years. Once the stock begins paying dividends, it will have the same dividends forever, a preferred stock equation. It is important to remember that the price we find will be the price one year before the first dividend, so: P19=D20/R P19=$20/0.07 P19=$285.7143 The price of the stock today is simply the present value of the stock price in the future. We simply discount the future stock price at the required return . The price of the stock today will be : P0=285.71/1.07^19 P0=$79

Find millions of documents on Course Hero - Study Guides, Lecture Notes, Reference Materials, Practice Exams and more. Course Hero has millions of course specific materials providing students with the best way to expand their education.

Below is a small sample set of documents:

DeVry NY - BUSN - 379
Chapter 4 do #3, Calculating Present values: For each of the following, compute the present value: Present Value $10,823.02 $29,411.69 $128,928.43 $72,388.42 Years 12 4 16 21 Interest Rate 4% 9% 12% 11% Future Value 17,328 41,517 790,382 647,816PV=FV/(1+
Andrews Univeristy - STAT - 101
MATH 3332 Midterm Exam Spring 2011 Directions: Please read each question carefully. Make sure to clearly mark your answers and show all necessary work. You may only consult with your professor on these problems. This test is due at the beginning of class
Andrews Univeristy - STAT - 101
Confidence IntervalsClick to edit Master subtitle style3/20/11Quick ReviewConstructing a CI1. 2.3.4.5.6.3/20/11t-distribution Students t-distribution Similar to a standard normal distributionSymmetric, bell shaped, centered on the mean (0) H
Andrews Univeristy - STAT - 101
Confidence IntervalsClick to edit Master subtitle style3/20/11EstimationEstimation is a form of statistical inference Estimation of population parametersEstimator a formula/process for estimating a parameter from sample data Estimate value/range of v
Andrews Univeristy - STAT - 101
Central Limit TheoremClick to edit Master subtitle style3/20/11QuestionSuppose we wanted to know the average height of all women attending UST how could we go about doing this?3/20/11QuestionSuppose we wanted to know the average height of all women
Andrews Univeristy - STAT - 101
Descriptive StatisticsClick to edit Master subtitle style3/20/11Descriptive StatsDescriptive statistics are used to describe data, i.e., descriptive statistics are used to summarize data in order to communicate information about the data set in a conc
Andrews Univeristy - STAT - 101
Random Variables and Probability DistributionsWhich wager would you prefer?You are given $100 and must pick one of two wagers, for an outcome based on flipping a fair coin:a) You win $200 if it comes up heads and lose $50 if it comes up tails b) You wi
Andrews Univeristy - STAT - 101
Contents 1. Mathematical Methods and Tools for Modeling Complex Systems . . . . . . . . . . . . . . . . . . . . . . . . . 25B.P. Kondratyev New Methods in Potential Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Andrews Univeristy - STAT - 101
Modes of Parametric Statistical InferenceSEYMOUR GEISSERDepartment of Statistics University of Minnesota, Minneapolis with the assistance ofWESLEY JOHNSONDepartment of Statistics University of California, IrvineA JOHN WILEY & SONS, INC., PUBLICATION
Andrews Univeristy - STAT - 101
Andrews Univeristy - STAT - 101
Unit Review - TEST 3 - Statistics 1. Replacement times for CD players are normally distributed with a mean of 7.1 years and a standard deviation of 1.4 years. A) Find the probability that a randomly selected CD player will have a replacement time less tha
Andrews Univeristy - STAT - 101
CLT(Central Limit Theorem) and Normal Probabilities - Draw a normal graph for eachproblem. Include x scores and z scores and shade appropriate areas. 1. Replacement times for CD players are normally distributed with a mean of 7.1 years and a standard dev
Andrews Univeristy - STAT - 101
Andrews Univeristy - STAT - 101
Purdue University Calumet - ACCO - 111
Acco 111 Prof. Noel Ortiz 13 de febrero de 2010 Tarea para entregar en el Taller V BE-41 The steps in using a worksheet are presented in random order below. List the steps in the proper order by placing numbers 1-5 in the blank spaces. (a) _ Prepare a tri
Arizona - NATS - 104
NATS104NutritionFoodandYou Spring2011HONORSREQUIREMENTSI.AllnormalclassrequirementsAllexams(plusoptionalfinal),alldiscussionsessions,allassignmentsandexercisesII.WhataretheadditionalHonorsrequirements? Createandpresentapowerpointpresentationonahotnutr
Arizona - NATS - 104
Nats Exam 4 Study Guide Eighty Proof Liquor Contains: 40% Alcohol Sodium is associated with chronic disease and therefore is not an essential necessary for human health: False Which mineral helps the antioxidant content of vitamin E: Selenium Steve drinks
Arizona - CPH - 178
Exam 1 Study Guide for CPH178 Spring 2011, Chapter 1-4 *Exams for this class are multiple choice, and conducted on D2L during class time. YOU MUST BE PRESENT IN CLASS TO TAKE THE EXAM OR YOU WILL BE GIVEN A ZERO. PLEASE BRING YOUR LAPTOP OR PLAN TO TAKE T
Arizona - MCB - 181R
MCB 181 Study Session 6 (Cell Membranes)Learning Goals for Study Session 6 (Cell Membranes) Provide a detailed description of the molecular structure of cellular membranes with specific attention to the plasma membrane and how its structure is related t
Arizona - MCB - 181R
MCB 181 Study Session 5 (Cells)Learning Goals for Study Session 5 (Cells) Understand the general role of cells in the function of the organism. Briefly describe why microscopes are needed to study cells. Distinguish between prokaryotic and eukaryotic cel
Arizona - MCB - 181R
MCB 181 Study Session 4 (Macromolecules)Learning Goals for Study Session 4 (Macromolecules) Briefly describe the four classes of large molecules that compose living cells and give example of their functions. Be able to draw the general structure of an a
Arizona - MCB - 181R
MCB 181 Study Session 3 (Organic Chemistry)Learning Goals for Study Session 3 (Organic Chemistry) Be able to explain why carbon atoms are uniquely suited to form the diverse organic molecules found in cells. Define the term isomer and describe the differ
Arizona - MCB - 181R
Biology 181R (MCB/BIOC/ECOL/MIC 181) Fall 2010 LECTURE SECTIONS 5 AND 6H M-W-F 3:00 PM Dr. Brian Larkins Today we will: go over the syllabus, including D2L access to Study Sessions, quizzes, exams and grading introduce the science of biology answer your q
Arizona - MCB - 181R
MCB 181 Study Session 2 (Review of Chemistry)Learning Goals for Study Session 2 (Review of Chemistry) Be able to describe the components of atoms and define terms such as atomic number, atomic mass, isotope, and energy shells. Describe how atoms form co
Arizona - MCB - 181R
MCB 181 Study Session 1 Introduction to the Science of BiologyLearning Goals for Study Session 1 (Introduction to the Science of Biology) Be able to briefly describe the scientific method and to define the terms fact, hypothesis, scientific theory, and s
Arizona - MCB - 181R
SYLLABUS Biology 181R (MCB/BIOC/ECOL/MIC 181) Fall 2010 LECTURE SECTIONS 5 AND 6H MWF 3 PM Dr. Brian Larkins http:/www.d2l.arizona.edu About the Course: Welcome to the introductory biology course at the University of Arizona. The course is designed as an
Arizona - MCB - 181R
Biology 181RSections 5, 6H Brian Larkins and Ramin Yadegari Hour Exam #3 November 6, 2009 (Version 1) LAST NAME: _ FIRST NAME:_ UA NET ID: _Instructions: Before starting this exam, read the Instructions! Fill in your name and NetID on both the exam book
Arizona - MCB - 181R
Biology 181RSections 5, 6H Brian Larkins and Ramin Yadegari Hour Exam #4 December 5, 2009 (Version 1) LAST NAME: _ FIRST NAME:_ UA NET ID: _Instructions: Before starting this exam, read the Instructions! Fill in your name and NetID on both the exam book
Arizona - MCB - 181R
Biology 181R Sections 5, 6H Brian Larkins and Ramin Yadegari Hour Exam #2 October 9, 2009 (Version 1) LAST NAME: _ FIRST NAME:_ UA NET ID#: _Instructions: Before starting this exam, read the Instructions! Fill in your name and NetID on both the exam book
Arizona - MCB - 181R
Biology 181R Sections 5, 6H Brian Larkins and Ramin Yadegari Hour Exam #1 September 18, 2009 (Version 1 Key) LAST NAME: _ FIRST NAME:_ UA NET ID#: _Instructions: Before starting this exam, read the Instructions! Fill in your name and NetID on both the ex
Arizona - MCB - 181R
Biology 181RSections 5, 6H Brian Larkins and Ramin Yadegari Hour Exam #4 December 5, 2009 (Version 1 Key) LAST NAME: _ FIRST NAME:_ UA NET ID: _Instructions: Before starting this exam, read the Instructions! Fill in your name and NetID on both the exam
Arizona - MCB - 181R
Biology 181RSections 5, 6H Brian Larkins and Ramin Yadegari Hour Exam #3 November 6, 2009 (Version 1 Key) LAST NAME: _ FIRST NAME:_ UA NET ID: _Instructions: Before starting this exam, read the Instructions! Fill in your name and NetID on both the exam
Arizona - MCB - 181R
Biology 181R Sections 5, 6H Brian Larkins and Ramin Yadegari Hour Exam #2 October 9, 2009 (Version 1 Key) LAST NAME: _ FIRST NAME:_ UA NET ID#: _Instructions: Before starting this exam, read the Instructions! Fill in your name and NetID on both the exam
College of Southern Nevada - BPS - 5
CHAPTER 1PICTURING DISTRIBUTIONS WITH GRAPHSOVERVIEWUnderstanding data is one of the basic goals in statistics. To begin, identify the individuals or objects described, then the variables or characteristics being measured. Once the variables are identi
London College of Accountancy - PSYCHOLOGY - 1XX3
P SYCH O LOGY1XX3 WINTER20 11 GRO UP PROJEC T Thisprojectwillspanacrossthetermandconsistofanumberofcheckinpointsandculminateinthecompletionofa finalResearchPaperdueonMarch21at5PMintheIntroPsychofficePC416andPresentationduringthelasttwo tutorials.Thegoalo
London College of Accountancy - PSYCHOLOGY - 1XX3
FLOOD- Yaanu JeyakumarChapter 132.) Why did Vinny soothe Andy? Vinny soothed Andy because he was terrified by the violent sounds that rung in the atmosphere around him. As stated in the text, Andy hears a woman screaming and the slam of the door. He als
London College of Accountancy - HISTORY - a03
T H I N K I NG I T T H RO UG HYaanu Jeyakumar 8STeacher: M rs. I fejikaU nit/ Chapter: U nit 1, Chapter 1 Class: 8S Assignment Handed I n on: M a r/10/11T H I N K I NG I T T H ROUG H 1. a) Comparing the political structure of Canada and other Bri tish
London College of Accountancy - HUMANITIES - 1A03
10/12/200905:19:00CHAPTER 2KeyConcepts collaborativeresearch:anapproachtolearningaboutculturethatinvolves anthropologistsworkingwithmembersofthestudypopulationaspartnersand ratherthanresearchersandsubjects. cultureshock:persistentfeelingsofuneasiness,lo
London College of Accountancy - HUMANITIES - 1A03
People Defining DevelopmentThis multimedia product and its contents are protected under copyright law. The following are prohibited by law: Any public performance or display, including transmission of any image over a network; Preparation of any derivati
London College of Accountancy - HUMANITIES - 1A03
03:35 KeyConcepts collaborativeresearch:anapproachtolearningaboutculturethatinvolves anthropologistsworkingwithmembersofthestudypopulationaspartnersand teammates ratherthanresearchersandsubjects. cultureshock:persistentfeelingsofuneasiness,loneliness,anda
London College of Accountancy - HUMANITIES - 1A03
COURSES > JACK CONLEY SECTION 1 > CHAPTER CONTENTS > CHAPTER 12: PEOPLE ON THE MOVE (PAVES 268 - 291) > REVIEW ASSESSMENT: CHAPTER 12 EXAMReview Assessment: Chapter 12 ExamChapter 12 Exam Completed 6 out of 20 pointsQuestion 1Multiple Choice Migration
London College of Accountancy - HUMANITIES - 1A03
Question 1 Multiple Choice 0 of 1 pointsThe contemporary anthropological study of cultures now uses a _ approach.Selected Answer:synchronicCorrect Answer:diachronicQuestion 2Multiple Choice0 of 1 pointsThe popularity of Feng Shui in U.S. interio
London College of Accountancy - HUMANITIES - 1A03
COURSES > JACK CONLEY SECTION 1 > CHAPTER CONTENTS > CHAPTER 12: PEOPLE ON THE MOVE (PAVES 268 - 291) > REVIEW ASSESSMENT: CHAPTER 12 EXAMReview Assessment: Chapter 12 ExamChapter 12 Exam Completed 6 out of 20 pointsQuestion 1Multiple Choice Migration
McMaster University - HUMANITIES - 1A03
COURSES > JACK CONLEY SECTION 1 > CHAPTER CONTENTS > CHAPTER 6: KINSHIP AND DOMESTIC LIFE (PAGES 128 - 153) > REVIEW ASSESSMENT: CHAPTER 6 EXAMReview Assessment: Chapter 6 ExamChapter 6 Exam Completed 13 out of 20 pointsQuestion 1Multiple Choice Kin a
McMaster University - HUMANITIES - 1A03
BirhorLocation.Aforestdwellingsocietyofover8,000peoplein1991,wholiveincentralandeasternIndiain thestatesofOrissa,Chhattisgarh,WestBengal,andJharkhandwiththegreatestconcentrationinthe Ranchi,Hazaribagh,andSinghbhumdistrictsofJharkhand. Economy.Thetraditio
McMaster University - HUMANITIES - 1A03
BatekLocation.About700to800Batek,anOrangAslisociety(MalayforOriginalPeople)liveintheforestsof PeninsularMalaysia,manyintheTamanNegaraNationalParkandsurroundingareas. Economy.TheeconomyoftheBatekisbasedongathering,hunting,andcollectingforestproductsfor tr
Staten Island - MATH - 101
8.Each of the numbers 0 through 24 is written on a piece of paper and all ofthe pieces of paper are placed in a hat. One number is selected at random. Determine the probability that the number selected is even.(Points:2) 13/25 13/24 11/24 1/29.Consider
Waterloo - GEOG - 101
Balance: the need to integrate the environment into our decision making Ecosystem: environmental assessment should be completed; reduce and eliminate unsustainable patterns of production and consumption: Conserve biodiversity Partnership: accesses to info
Waterloo - GEOG - 101
Livelihood & EconomyPrimary activitiesCotton bales, Ivory CoastEconomic Geography Howpeople earn a living in different areas how livelihoods systems vary from place to place how economic activities are spatially interrelated seeks spatial generalizat
Waterloo - GEOG - 101
Before bottom trawlingHuman Impacts Human on the Marine Environment MarineAfter bottom trawlingAccidental bycatch1. Assessment: threats to worlds coral reefs 2. Map showing reefs at risk Risk factors identified for coral reefs also oceans generallyGl
Waterloo - GEOG - 101
Human Impacts Human on on Natural Systemsigh Hay wAmazon: trans-Amazonian highway just builtAmazon: a few years later (settlement & deforestation)Nov. 18 The Great Squeeze (68)Video: Nov. 30 Cane Toads: an unnatural historyHuman Impacts on environ
Waterloo - GEOG - 101
DevelopmentAidDevelopment Aid A.k.a.: Foreign aid/development assistance Actors:Multilateral, bilateral NGO Approaches: Financial: Loans & Grants Technical aid Structural adjustment Capacity building Questionable approaches Tied aid & aid for whom?
Waterloo - GEOG - 101
Development & Change ChangeDevelopment definitions Many definitions: economic basis All definitions contentious Text: Extent to which the human and natural resources of an area or country have been brought into full productive use Economic growth Moder
Waterloo - GEOG - 101
Economic geography: is the study of how people earn their living, how lively hood system vary by area and how economic system are spatially interrelated and linked. Primary structures: are those that harvest or extract something from the earth Secondary s
Waterloo - GEOG - 101
BasicMolecularBiology2.1 Nucleic acid structure 2.1.1 The DNA backbone (key concept: stability of dsDNA) 2.1.2 The base pairs (key concept: melting temperature, hybridization - salt / temp.) 2.1.3 RNA structure (key concept: instability of ssRNA) 2.1.4 N
Waterloo - BIOL - 140
Lecture 14 Lecture14.1. Formation and Early History of Earth 14.2. Origin of Cellular Life 14.3. Microbial Diversification: Consequences for Earths Biosphere 14.4. Endosymbiotic Origin of Eukaryotes 14.5. The Evolutionary Process 14.6. Evolutionary Analy
Waterloo - BIOL - 140
Lecture 11 Lecture11.13 The Formation of Hfr Strains and Chromosome Mobilization 11.14 Complementation 11.16 Mobile DNA: Transposable Elements 11.1 Genetic Map of the Escherichia coli Chromosometransfer of plasmid DNA by conjugation: transfercontact be
Waterloo - BIOL - 140
Lecture 79.1. Major Modes of Regulation 9.2. DNA Binding Proteins 9.3. Negative Control of Transcription: Repression and Induction 9.4 Positive Control of Transcription 9.5. Two-Component Regulatory Systems 9.7. Regulation of Chemotaxisregulation: regul
Waterloo - BIOL - 140
Lecture 66.12. Effect of Temperature on Growth 6.13. Microbial Growth at Cold Temperatures 6.14. Microbial Growth at High Temperatures 6.15. Microbial Growth at Low or High pH 6.16. Osmotic Effects on Microbial Growth 6.17. Oxygen and Microbial Growth 6.
Waterloo - BIOL - 140
Lecture 55.1. Microbial Nutrition 5.2. Culture Media 5.3. Laboratory Culture of Microorganisms 6.1. Cell Growth and Binary Fission 6.2. Fts Proteins, the Cell Division Plane, and Cell Morphology 6.3. MreB and Determinants of Cell Morphology 6.4. Peptidog
Waterloo - BIOL - 140
Lecture 4 4.9 Cell Surface Layers, Pili, and Fimbriae 4.10 Cell Inclusions 4.11 Gas Vesicles 4.12 Endospores 4.13 Flagella and Motility 4.14 Gliding Motility 4.15 Cell Motion as a Behavioral Response: Microbial Taxesthe flagellum:filament PMF provides