Questions from Corporate Finance


Q: In the Data Case in Chapter 5, we suggested using the

In the Data Case in Chapter 5, we suggested using the yield on Florida Sate bonds to estimate the State of Florida’s cost of capital. Why might this estimate overstate the actual cost of capital?

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Q: Grummon Corporation has issued zero-coupon corporate bonds with a five

Grummon Corporation has issued zero-coupon corporate bonds with a five-year maturity. Investors believe there is a 20% chance that Grummon will default on these bonds. If Grummon does default, investo...

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Q: The following table summarizes prices of various default-free, zero

The following table summarizes prices of various default-free, zero-coupon bonds (expressed as a percentage of face value): a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yi...

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Q: The Isabelle Corporation rents prom dresses in its stores across the southern

The Isabelle Corporation rents prom dresses in its stores across the southern United States. It has just issued a five-year, zero-coupon corporate bond at a price of $74. You have purchased this bond...

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Q: What does it mean for a country to “inflate away”

What does it mean for a country to “inflate away” its debt? Why might this be costly for investors even if the country does not default?

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Q: Suppose the yield on German government bonds is 1%, while the

Suppose the yield on German government bonds is 1%, while the yield on Spanish government bonds is 6%. Both bonds are denominated in euros. Which country do investors believe is more likely to default...

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Q: Describe the important changes that have occurred in stock markets over the

Describe the important changes that have occurred in stock markets over the last decade.

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Q: Suppose the current zero-coupon yield curve for risk-free

Suppose the current zero-coupon yield curve for risk-free bonds is as follows: a. What is the price per $100 face value of a two-year, zero-coupon, risk-free bond? b. What is the price per $100 face...

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Q: In the Global Financial Crisis box in Section 6.1,

In the Global Financial Crisis box in Section 6.1, www.Bloomberg.com reported that the three month Treasury bill sold for a price of $100.002556 per $100 face value. What is the yield to maturity of t...

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Q: Suppose a 10-year, $1000 bond with an 8

Suppose a 10-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for a price of $1034.74. a. What is the bond’s yield to maturity (expressed as an APR with semiannual compounding...

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