Calculating Returns Suppose you bought a 6 percent coupon bond one year ago for $1,040. The bond sells for $1,063 today. • Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? • What was your total nominal rate of return on this investment over the past year? • If the inflation rate last year was 3 percent, what was your total real rate of return on this investment?
Q: Which credit card should he choose? his total anual expense for card A will be ? round to the…
A: Given:Card ACard BAPR22%22%Annual Fee ($)040Monthly balance ($)699699
Q: What will be the price of these bonds if they receive either an A or a AA rating?
A: Price of the bond is the PV of coupons and par value discounted at the yield.
Q: What is the present value of a growing annuity where the first annual payment (of $40,000) is in one…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Q: What is the expected return and standard deviation for the minimum-variance portfolio of the two…
A: A minimum variance portfolio is a concept in modern portfolio theory (MPT) that refers to a specific…
Q: Scenario 1 Scenario 2 Scenario 3 Scenario 4 Probabil ity 10.0% 25.0% 30.0% 20.0% Rate of Return…
A: Correlation coefficient between two stocks is a standardized measure of comovement of return.
Q: You have the chance to participate in a project that produces the following cash flows: Cash…
A: NPV means Net Present value.It is a capital budgeting technique used for making investment…
Q: Your daughter wants to go to the University of Michigan. She is already planning to start in 16…
A: Time until first Payment = t = 16 - 1 = 15Payment = p = $18,687Number of Payment = n = 4…
Q: Two mutually exclusive alternatives are being considered for the environmental protection equipment…
A: The AW method is commonly used for comparing alternatives. As illustrated in Chapter 4, AW means…
Q: If the present value of an ordinary, 6-year annuity is $5,600 and interest rates are 7.5 percent,…
A: An annuity due is when payments are made at the beginning of each period as opposed to end of each…
Q: Hassle-Free Web is bidding to provide web hosting services for Hotel Lisbon. Hotel Lisbon pays its…
A: Present value annuity factor is computed as follows:-PVAF = wherePVAF = Present value annuity…
Q: start saving in one year from now a fixed amount for 20 total deposits. Wha is the amount of that…
A: First we need to determine the PV of all 4 payments using the formula below:CFn = cash flow in year…
Q: AA Corporation's stock has a beta of 2.1. The risk-free rate is 6% and the expected return on the…
A: We need to calculate CAPM equation to calculate required rate return.Required rate of return = Risk…
Q: You just closed on a $1,041,051 home with a 30 year mortgage and an APR of 6.77 percent with monthly…
A: We usually take loan to buy a house. This is because we are not able to buy a house on an upfront…
Q: You have been tasked with using the FCF model to value Julie’s Jewelry Co. After your initial…
A: Equity beta = 1.6Debt-to-equity ratio = 0.5Tax rate = 21%Risk free rate = 5%Market risk premium =…
Q: Recall that on a one-year Treasury security the yield is 5.6100% and 6.7320 % on a two-year Treasury…
A: 2 year yield = [(1year yield)+ (expected 1 year yield in one year)/2] + Maturity Risk Premium
Q: What is the bond’s nominal yield to call?
A: First, we need to determine the price of the bond. Price of the bond is the PV of all coupons and…
Q: If a silver mining company wants to protect against low silver price in the future, it should short…
A: Hedging is used to prevent loss in the spot market by taking opposite position in the future…
Q: Following is information on two alternative investment projects being considered by Tiger Company.…
A: The internal rate of return (IRR) is a financial tool that helps predict an investment's future…
Q: Your grandparents would like to establish a trust fund that will pay you and your heirs $210,000 per…
A: Present value:Present value is a financial concept that refers to the current worth of a future cash…
Q: Question 10 Suppose $50,000 was invested on January 1, 1980 at an annual effective interest rate of…
A: Perpetuity is a series of payments made at regular intervals over a period of time. The present…
Q: oblem 5-27 Discounted Cash Flow Analysis [LO1] appropriate discount rate for the following cash…
A: Present value is the equivalent value today of the future cash flow based on time value of money..
Q: 6) GRIFF Bonds with a face value of $1000 currently trade at $1,158 (that's the current price) and…
A: Here, Par Value of Bond (FV) $ 1,000.00Current Price of Bond (PV) $ 1,158.00Coupon Rate…
Q: is amortized by level payments made at the end of each quarter for 25 years.Tge monthly rate is…
A: Amortization refers to the breakdown of loan payments into principal and interest portions. It…
Q: A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following…
A: The method of calculating a bond's present value of future cash flows, which takes into account both…
Q: Assume the following information: British pound spot British pound 6-month forward Annual interest…
A: Covered interest arbitrage is an arbitrage strategy where investors use forward contracts to hedge…
Q: Portfolio Value If collar is used If you continued to hold the shares Answer is complete but not…
A: In a collar strategy you buy the put option with strike price 60 by paying a premium of $6 and…
Q: You have just won the lottery and will receive $1,000,000 in one year. You will receive payments for…
A: Solution:-When an equal amount is received each period at some constant growth rate, it is known as…
Q: Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier…
A: Free cash flow for Shark= $7100000Growth rate for five years= 7%Growth rate for perpetuity= 4%Cost…
Q: A company is trying to decide between two independent projects. Each project has a cost of capital…
A: Solution:Cost of capital means the minimum rate of return required the shareholders of a firm.If the…
Q: has found a mutual fund that will earn 10 percent semi-annually. How much will Sar ay? What if Sarah…
A: Money have time value and value of money change with time, Money today will not be same tomorrow.
Q: What is the price of a European call option on a non-dividend-paying stock when the stock price is…
A: A Call Option is a financial contract that gives the holder the right, but not the obligation, to…
Q: Alyssa sold 38 furniture sets during August. Her target for September is to sell 15% more furniture…
A: Solution:Percentage increase means the increase in base value with reference to the per hundred…
Q: Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a…
A: Bond price is the sum of present value of all coupon payments and present value of face value…
Q: Given the information below for HooYah! Corporation, compute the expected share price at the end of…
A: Here,…
Q: Consider a project with the following cash flows: Time 0 1 2 3 4 5 CF -$5,000 $5,000 $4,000 $2,000…
A: IRR stands for internal rate of return. It is an important capital budgeting metric. IRR is that…
Q: What are the pros and cons of regulating the financial markets and why are certain banks too big to…
A: A financial market is a marketplace where individuals, institutions, and governments trade financial…
Q: Identify the various stakeholders of an organisation and briefly describe each stakeholder’s…
A: Stakeholders are individuals, groups, or entities that have an interest or concern in a particular…
Q: A company just paid 2.50 dividend and expects it to grow 7% for the next 4 years, after 4 years, the…
A: Stock value will be the sum of present value of all future dividends and present value of terminal…
Q: Suppose IBM receives quotes of USD 0.008170-7 for the Japanese Yen ( JPY). What is the JPY value to…
A: The bid rate is the exchange rate at which the forex broker is willing to buy the base currency in…
Q: Incremental cash flows: a. refer to only cash flows which occur at the end of a project b. are cash…
A: Incremental cash flows is an important concept in finance. Incremental cash flow is the extra or the…
Q: Investment X offers to pay you $5,300 per year for eight years, whereas Investment Y offers to pay…
A: The present value is the cumulative value of all cash flows today after being discounted at an…
Q: Suppose that you can only qualify for a monthly mortgage payment of $787.35 (on a $165,000, 30-year…
A: Compound = monthly = 1230 Year Monthly Payment = p = $787.35Present Value of Mortgage = pv =…
Q: You are the CFO of a company that is considering issuing its first bond issue to the public. You…
A: Equity Financing:Involves raising capital by selling ownership shares (equity) in the company.Does…
Q: Given, Sales : $250,000 Costs : $134,000 Depreciation : $10,200 Operating expenses : $6,000…
A: Operating cash flows is the cash flows generated from normal operations - selling and distributing…
Q: Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5…
A: Economic Value Added (EVA), sometimes known as Economic Profit, is a metric built on the Residual…
Q: Here is information for a finacial company:CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED…
A: Debt financing is the term used to describe borrowing money from outside sources to operate a firm…
Q: PB-17 Norconstant Dividends (LO) Lohn Corporation is expected to pay the following dividends over…
A: Variables in the question:DividendD1=$14D2=$10D3=$9D4=$5D5=Constant growth rate of 6% (forever)…
Q: Given a $200,000 loan, monthly payments, 30 years at 3.75%, how much interest is paid over the life…
A: Compound = Monthly = 12Present Value = pv = $200,000Time = t = 30 * 12 = 360Interest Rate = r = 3.75…
Q: A particular famous painting was purchased for $720,000 in the year 2021. The value has been…
A: In continuous compounding there is infinite compounding and it is the highest form of compounding…
Q: You own a bond with a par value of $1,000 and a coupon rate of 8.50% (semiannual coupon). You know…
A: The yield to maturity is the total return an investor earned by holding the bond until its maturity.…
Calculating Returns Suppose you bought a 6 percent coupon bond one year ago for $1,040. The bond sells for $1,063 today. • Assuming a $1,000 face value, what was your total dollar
Step by step
Solved in 3 steps with 3 images
- Please include the excel formula Suppose you bought a bond with an annual coupon of 6 percent one year ago for $1,010. The bond sells for $1,025 today.a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?b. What was your total nominal rate of return on this investment over the past year?c. If the inflation rate last year was 3 percent, what was your total real rate of return on this investment? Input area: Coupon rate 6% Initial price $1,010 Ending price $1,025 Par value $1,000 Inflation rate 3% (Use cells A6 to B10 from the given information to complete this question.) Output area: Coupon paid Dollar return Nominal return Real returnSuppose you bought a bond with an annual coupon rate of 4 percent one year ago for $800. The bond sells for $850 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? b. What was your total nominal rate of return on this investment over the past year? c. If the inflation rate last year was 2 percent, what was your total real rate of return on this investment?Suppose you bought a bond with an annual coupon of 9 percent one year ago for $1,160. The bond sells for $1,210 today. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? What was your total nominal rate of return on this investment over the past year? If the inflation rate last year was 7 percent, what was your total real rate of return on this investment?
- Suppose you bought a bond with an annual coupon of 6 percent one year ago for $1,170. The bond sells for $1,235 today. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? What was your total nominal rate of return on this investment over the past year?Suppose you purchase a 10-year bond with 6.19% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.34% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Years 2 3 Cash Flows $106.46 $6.19 $6.19 $6.19 $110.46 B. Years 0 2 3 4 Cash Flows - $106.46 $6.19 $6.19 $6.19 $110.46 C. Years 0 1 2 3 4 Cash Flows $104.27 $6.19 $6.19 $6.19 $110.46 D. Years 0 2 3 4 + $6.19 $6.19 $6.19 $104.27 Cash Flows - $110.46 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.)Suppose you purchase a 10-year bond with 6.19% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.34% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Years 0 2 3 4 Cash Flows $106.46 $6.19 $6.19 $6.19 $110.46 B. Years 0 2 3 4 Cash Flows - $106.46 $6.19 $6.19 $6.19 $110.46 ○ C. Years 0 2 3 4 Cash Flows $104.27 $6.19 $6.19 $6.19 $110.46 D. Years 0 2 3 4 Cash Flows - $110.46 $6.19 $6.19 $6.19 $104.27 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.)
- Suppose you purchase a 10-year bond with 6.64% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.17% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) OA. Years Cash Flows O B. Years C. Years Cash Flows Cash Flows - $114.06 O D. Years 0 Cash Flows $107.42 0 0 - $111.26 0 $111.26 1 $6.64 1 $6.64 1 $6.64 1 $6.64 2 $6.64 2 + $6.64 2 + $6.64 2 + $6.64 3 $6.64 3 $6.64 3 $6.64 3 $6.64 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.) 4 $114.06 4 $107.42 4 $114.06 4…Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 4.01% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ The total cash flow at time 4 (after the fourth coupon) is $ negative number.) b. What is the internal rate of return of your investment? (Round to the nearest cent. Enter a cash outflow as aSuppose you purchase a 10-year bond with 6.4% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.5% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Year 0 1 2 3 4 Cash Flows $110.90 $6.40 $6.40 $6.40 $104.50 B. Year 0 1 2 3 4 Cash Flows - $106.78 $6.40 $6.40 $6.40 $110.90 C. Year 0 2 3 4 Cash Flows $104.50 $6.40 $6.40 $6.40 $110.90 OD. Year 1 2 3 Cash Flows $106.78 $6.40 $6.40 $6.40 $110.90 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to one decimal place.)
- Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for fouryears, and sell it immediately after receiving the fourth coupon. If the bond’s yield to maturitywas 5% when you purchased and sold the bond,a. What cash flows will you pay and receive from your investment in the bond per $100 face value?b. What is the internal rate of return of your investment?Suppose you purchase a ten-year bond with 12% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 10.64% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ number.) (Round to the nearest cent. Enter a cash outflow as a negative The total cash flow at time 4 (after the fourth coupon) is $. (Round to the nearest cent. Enter a cash outflow as a negative number.) b. What is the internal rate of return of your investment? The internal rate of return of your investment is %. (Round to two decimal…If you purchased a bond one year ago for $1000 and just sold it for $1100 after receiving the $50 annual coupon payment, then what was your real return on the investment if theinflation rate was 2.1% for the same year?
