test 2 C solutions 2019 spring(1).docx - FNAN 303 Spring...

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FNAN 303, Spring 2019, test 2, version C, solutions1. Bond A has a coupon rate of 12.60 percent, a yield-to-maturity of 5.90 percent, and a face value of $1,000; matures in 10 years; and pays coupons annually with the next coupon expected in 1 year. What is (X + Y + Z) if X is the present value of any coupon payments expected to be made in 4 years from today, Y is the present value of any coupon payments expected to be made in 8 years from today, and Z is the present value of any coupon payments expected to be made in 12 years from today?A. An amount less than $60 or an amount equal to or greater than $8,500B. An amount equal to or greater than $60 but less than $130C. An amount equal to or greater than $130 but less than $200D. An amount equal to or greater than $200 but less than $270E. An amount equal to or greater than $270 but less than $8,500
Approach:1) Determine the coupon payments expected in 4, 8, and 12 years2) Determine the appropriate period length and discount rate3) Find the present values of any coupon payments expected in 4, 8, and 12 years4) Add up the present values of any coupon payments expected in 4, 8, and 12 years1) Determine the coupon payments expected in 4, 8, and 12 years
2) Determine the appropriate period length and discount rate
3) Find the present values of any coupon payments expected in 4, 8, and 12 years
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4) Add up the present values of any coupon payments expected in 4, 8, and 12 years
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FNAN 303, Spring 2019, test 2, version C, solutions2. An oyster farm is expected to produce cash flows of $41,600 per quarter with the first quarterly cash flow expected later today and the last quarterly cash flow expected in 5 quarters from today. The cost of capital for the oyster farm is 9.72 percent per year. What is the value of the oyster farm?

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