Question: 1. Since 2011, the U.S. dollar

> Develop a spreadsheet to do the dollar amount and percentage profit and loss calculations in questions 4 and 5. Use as inputs to the spreadsheet the amount of your funds you are investing, the initial margin percentage, the maintenance margin percentage,

> Boneyard Biscuits Dutch auction for an IPO was a great success. The firm offered 100 million shares. Bids appear next. a) What is the clearing price? b) What options do Boneyard and its underwriters have for allocating shares? How many shares will each

> Below are the results of a Dutch auction for an IPO of Bagel’s Bagels, a trendy bagel and coffee shop chain. Bagel’s is offering 50 million shares. a) What will be the clearing price? b) How many shares will each bidder receive if Bagel’s allocates share

> A U.S. firm wants to raise $15 million by selling 1 million shares at a net price of $15. We know that some say that firms “leave money on the table” because of the phenomenon of underpricing. a. Using the average amount of underpricing in U.S. IPOs, how

> 1. Which of the following are major components of the gross domestic product? a. Personal consumption expenditures b. Government expenditures including gross investment c. Gross private domestic investment d. Net exports of goods and services e. All

> You are the president and chief executive officer of a family-owned manufacturing firm with assets of $45 million. The company articles of incorporation and state laws place no restrictions on the sale of stock to outsiders. An unexpected opportunity to

> Billon Corporation has two bond issues outstanding, each with a par value of $1,000. Information about each is listed below. Suppose market interest rates rise 1 percentage point across the yield curve. What will be the change in price for each of the bo

> Kamins Corporation has two bond issues outstanding, each with a par value of $1,000. Information about each is listed below. Suppose market interest rates rise 1 percentage point across the yield curve. What will be the change in price for each of the bo

> Judith, Inc. bonds mature in 8 years and pay a semi-annual coupon of $55. The bond’s par value is $1,000. a. What is their current price if the market interest rate for bonds of similar quality is 9.2%? b. A change in Fed policy increases market interest

> The Garcia Company’s bonds have a face value of $1,000, will mature in 10 years, and carry a coupon rate of 16 percent. Assume interest payments are made semiannually. a. Determine the present value of the bond’s cash flows if the required rate of return

> a. By how much would the value of the bond in Problem 4 change if investors wanted an 8-percent rate of return? b. A bond with the same par value and coupon rate as the bond in Problem 4 has 14 years until maturity. If investors will use a 10 percent dis

> Assume a $1,000 face value bond has a coupon rate of 8.5 percent paid semiannually and has an eight-year life. If investors are willing to accept a 10 percent rate of return on bonds of similar quality, what is the present value or worth of this bond?

> A firm’s dividends are expected to grow 20 percent a year for the next five years and then trend downward by 3 percent a year until they stabilize at a constant growth rate of 5 percent. The current dividend is $0.80 a share and the stock’s required rate

> JW Corp has a dividend of $0.50. The dividend is expected to grow at a 6% rate over time. Based on the stock’s risk, investors require an 11-percent rate of return. a. Using the constant dividend growth model, what should the stock’s price be? b. Estima

> Tough times have hit the retail store chain of Brador, Inc. Analysts expect its dividend of $1.00 a share to fall by 50 percent next year and another 50 percent the following year before it returns to its normal growth pattern of 3 percent a year. If inv

> 1. A forward rate can be used to do which of the following? a. Mitigate currency exchange rate risk b. Reduce currency exchange rate risk c. Try to profit from expected currency exchange rate changes d. All of the choices are correct 2. Which of th

> 1. Who are the major participants in the U.S. monetary system? a. Central bank b. Banking system that creates deposit money and transfers money c. Banking system that provides financial intermediation and processes/clears checks d. All of the choices

> Ritter Incorporated just paid a dividend of $2 per share. Its management team has just announced a technological breakthrough that is expected to result in a temporary increase in sales, profits, and common stock dividends. Analysts expect the firm’s per

> Using the regular Treasury note of problem 2; a) What is its price if investors’ required rate of return is 6 % on similar bonds? Treasury notes pay interest semiannually. b) Erron Corporation wants to issue five-year notes but investors require a credit

> Interpret the following stock price quote. In addition, what is Sizzler’s approximate earnings per share? What was the stock’s closing price the previous day?

> Lerman Company has preferred stock outstanding. It pays an annual dividend of $10. If its current price is $70, what is the discount rate investors are using to value the stock?

> The common stock of RMW Inc. is selling at $88 a share. It just paid a dividend of $4. Investors expect a return of 15 percent on their investment in RMW Inc. From this information, what is the expected growth rate of future dividends?

> Mercier Corporation’s stock is selling for $95. It has just paid a dividend of $5 a share. The expected growth rate in dividends is 8 percent. a. What is the required rate of return on this stock? b. Using your answer to Part a, suppose Mercier announces

> The French Thaler and Company’s stock has paid dividends of $1.60 over the past 12 months. Its historical growth rate of dividends has been 8 percent but analysts expect the growth to slow to 5 percent annually for the foreseeable future. a. Determine t

> The Lo Company earned $2.60 per share and paid a dividend of $1.30 per share in the year just ended. Earnings and dividends per share are expected to grow at a rate of 5 percent per year in the future. Determine the value of the stock: a. if the required

> The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per share annually. Investors believe the nominal risk-free rate is 4 percent and that this stock should have a risk premium of 6 percent. What should be the value of this stock?

> The Fridge-Air Company’s preferred stock pays a dividend of $4.50 per share annually. If the required rate of return on comparable quality preferred stocks is 14 percent, calculate the value of Fridge-Air’s preferred stock.

> 1. What is the net difference between a country’s import and export of goods called its a. Balance of payments b. Balance of trade c. Merchandise trade balance d. Current account 2. What is a summary of the flow of funds between one country and all

> You purchased 200 shares of H2O Corporation stock at a price of $20. Consider each of the following announcements separately. What will the price of the stock be after each change? How many shares will you own? What will be the total value of your holdin

> If a stock’s earnings per share is $2.00 what will be the dividend per share if the payout ratio is 40%? If the following year’s earnings per share is $2.10 what will the payout ratio be if the firm wants to maintain dividend growth of 8 percent?

> Judy Johnson is choosing between investing in two Treasury securities that both mature in five years and have par values of $1,000. One is a Treasury note paying an annual coupon of 5.06 percent. The other is a TIPS which pays 3 percent interest annually

> Global Cycles (GC) offers investors a DRIP program. An investor purchases 100 shares of GC at a price of $20 per share on January 2. How many shares will the investor own on December 31 if the following dividends are paid and the investor participates in

> A bond with a par value of $1000 has a coupon rate of 7 percent and matures in 15 years. Using a spreadsheet program, graph its price versus different yields to maturity, ranging from 1 percent to 20 percent. Is the relationship between price and yield l

> a. You own a two-bond portfolio. Each has a par value of $1000. Bond A matures in 5 years, has a coupon rate of 8 percent, and has a annual yield to maturity of 9.20 percent. Bond B matures in 15 years, has a coupon rate of 8 percent and has an annual yi

> A $1,000 face value bond issued by the Dysane Company currently pays total annual interest of $79 per year and has a 13-year life. a. What is the present value, or worth, of this bond if investors are currently willing to accept a 10 percent annual rate

> You run across the following bond quotation on a Friday. a) What kind of security is it? b) Interpret the information that is contained in the quote. c) Suppose a corporate bond with the same time to maturity has a credit-risk spread of 250 basis

> Perusing the corporate bond quotations, you write down some summary information: Last Last Est Est $ Vol Company (Ticker) Coupon Maturity Price Yield Spread UST (000’s) a) Which company is the riskiest? Why? b) Which bond has the highest default risk? Wh

> On Thursday, the following bond price quotation appears in the newspaper. Interpret each item that appears in the quote and compute its current yield. Last Last Est Est $ Vol Company (Ticker) Coupon Maturity Price Yield Spread UST (000’s)

> 1. An unconditional written order, signed by the party drawing it, requiring the party to whom it is addressed to pay a certain sum of money to order or to the bearer is called which of the following? a. Order bill of lading b. Commercial letter of cre

> What is the approximate yield to maturity (use formula 10-3) and the exact yield to maturity (use a calculator) for the following bonds? Assume these are bonds issued in the U.S. a. 10 years to maturity, 6% coupon rate, current price is $950. b. 16 years

> BVA Inc. has two bond issues outstanding, each with a par value of $1,000. Information about each is listed below. Suppose market interest rates rise 1 percentage point across the yield curve. What will be the change in price for each of the bonds? Does

> Koppen Corporation has two bond issues outstanding, each with a par value of $1,000. Information about each is listed below. Suppose market interest rates rise 1 percentage point across the yield curve. What will be the change in price for each of the bo

> Compute the annual interest payments and principal amount for a Treasury Inflation-Protected Security with a par value of $1,000 and a 3-percent interest rate if inflation is 4 percent in year 1, 5 percent in year 2, and 6 percent in year 3.

> Assume you are planning to invest $5,000 each year for six years and will earn 10 percent per year. Determine the future value of this annuity if your first $5,000 is invested at the end of the first year.

> Determine the future value at the end of two years of an investment of $3,000 made now and an additional $3,000 made one year from now if the compound annual interest rate is 4 percent.

> Determine the present value if $15,000 is to be received at the end of eight years and the discount rate is 9 percent. How would your answer change if you had to wait six years to receive the $15,000?

> Determine the present values if $5,000 is received in the future (i.e., at the end of each indicated time period) in each of the following situations: a. 5 percent for ten years b. 7 percent for seven years c. 9 percent for four years

> Find the present value of $7,000 to be received one year from now assuming a 3 percent annual discount interest rate. Also calculate the present vale if the $7,000 is received after two years.

> You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding. a. What would be the future value of your investment? b. Now assume that inflation is expected to be 3 percent per year over the same

> Determine the future values if $5,000 is invested in each of the following situations: a. 5 percent for ten years b. 7 percent for seven years c. 9 percent for four years

> The following cash flow streams are expected to result from three investment opportunities. a. Find the present values at the end of time period zero for each of these three investments if the discount rate is 15 percent. Also, find the present values

> A credit card advertisement states that the annual percentage rate is 21 percent. If the credit card requires quarterly payments, what is the effective annual rate of interest on the loan?

> You have recently seen a credit card advertisement that states that the annual percentage rate is 12 percent. If the credit card requires monthly payments, what is the effective annual rate of interest on the loan?

> Answer the following questions. a. What is the annual percentage rate (APR) on a loan that charges interest of .75 percent per month? b. What is the effective annual rate (EAR) on the loan described in (a)?

> What would be the present value of a $9,532 annuity for which the first payment will be made beginning one year from now, payments will last for 27 years, the annual interest rate is 13 percent, quarterly discounting occurs, and $2,383 is invested at the

> Use a financial calculator or computer software program to answer the following questions. a. What is the present value of $359,000 that is to be received at the end of 23 years, the discount rate is 11 percent, and semiannual discounting occurs? b. How

> Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent. a. What would be the future value if the interest rate is a simple interest rate? b. What would be the future value if the interest rate is a compoun

> Use a financial calculator or computer software program to answer the following questions. a. What would be the future value of $19,378 invested now if the money remains deposited for eight years, the annual interest rate is 18 percent, and interest on t

> Use a financial calculator or computer software program to answer the following questions: a. What would be the future value of $7,455 invested annually for nine years beginning one year from now if the annual interest rate is 19 percent? b. What would b

> 1. In which case does an equilibrium currency exchange rate exist? a. When supply is greater than demand b. When demand is greater than supply c. When supply and demand are in balance d. All of the choices are correct. 2. In addition to supply and

> Use a financial calculator or computer software program to answer the following questions: a. What is the present value of $359,000 that is to be received at the end of 23 years if the discount rate is 11 percent? b. How would your answer change in Part

> Use a financial calculator or computer software program to answer the following questions: a. What would be the future value of $15,555 invested now if it earns interest at 14.5 percent for seven years? b. What would be the future value of $19,378 invest

> Assume a bank loan requires an interest payment of $85 per year and a principal payment of $1,000 at the end of the loan’s eight-year life. a. How much could this loan be sold for to another bank if loans of similar quality carried an 8.5 percent interes

> You are considering borrowing $150,000 to purchase a new home. a. Calculate the monthly payment needed to amortize an 8 percent fixed-rate 30-year mortgage loan. b. Calculate the monthly amortization payment if the loan in (a) was for 15 years.

> Determine the annual payment on a $15,000 loan that is to be amortized over a four-year period and carries a 10 percent interest rate. Also prepare a loan amortization schedule for this loan.

> Determine the annual payment on a $500,000, 12 percent, business loan from a commercial bank that is to be amortized over a five-year period.

> What is the present value of a loan that calls for the payment of $500 per year for six years if the discount rate is 10 percent and the first payment will be made one year from now? How would your answer change if the $500 per year occurred for ten year

> Determine the present value now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4 percent.

> Find the future value one year from now of a $7,000 investment at a 3 percent annual compound interest rate. Also calculate the future value if the investment is made for two years.

> Find the default risk premium for a debt security given the following information: inflation premium = 3%, maturity risk premium = 2.5%, real rate = 3%, liquidity premium = 0%, and market interest rate is 10%.

> 1. Which is the method that indicates the value of one unit of a foreign currency in terms of a home country’s currency? a. Direct quotation method b. Indirect quotation method c. Negotiated quotation method d. All of the choices are correct. 2. Wh

> Find the nominal interest rate for a debt security given the following information: real rate = 2%, liquidity premium = 2%, default risk premium = 4%, maturity risk premium = 3%, and the inflation premium = 3%.

> Inflation is expected to be 3 percent over the next year. You desire an annual real rate of return of 2.5 percent on your investments. a. What nominal rate of interest would have to be offered on a one-year Treasury security for you to consider making an

> You are considering an investment in a one-year government debt security with a yield of 5 percent or a highly liquid corporate debt security with a yield of 6.5 percent. The expected inflation rate for the next year is expected to be 2.5 percent. a. Wha

> A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten-year Treasury note has an interest rate of 2.5 percent. A maturity risk premium is estimated to be 0.2 percentage points for the longer maturity bond. Investors expect i

> A 30-year U.S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten-year Treasury note has an interest rate of 3.7 percent. If inflation is expected to average 1.5 percentage points over both the next ten years and thirty years, determine th

> A 20-year U.S. Treasury bond has a 3.50 percent interest rate, while a same maturity corporate bond has a 5.25 percent interest rate. Real interest rates and inflation rate expectations would be the same for the two bonds. If a default risk premium of 1.

> A one-year U.S. Treasury security has a market interest rate of 2.25 percent. If the expected real rate of interest is 1.50 percent, what is the expected annual inflation rate?

> Following are some selected interest rates. a. Plot a yield curve using interest rates for government default risk-free securities. b. Plot a yield curve using corporate debt securities with low default risk (high quality) and a separate yield curve fo

> A 30-year corporate bond has a nominal interest rate of 12 percent. This bond is not very liquid and consequently requires a 2 percent liquidity premium. The bond is of low quality and thus has a default risk premium of 2.5 percent. The bond has a remain

> The interest rate on a 20-year Treasury bond is 9.25 percent. A comparable maturity Aaa-rated corporate bond is yielding 10 percent. Another comparable maturity but lower quality corporate bond has a yield of 14 percent which includes a liquidity premium

> 1. The European Union at the end of 2015 consisted of how many independent member states? a. 6 b. 12 c. 18 d. 28 2. How many member states are currently Eurozone members? a. 19 b. 15 c. 12 d. 6 3. The euro became the official currency of 11 E

> A Treasury note with a maturity of four years carries a nominal rate of interest of 10 percent. In contrast, an 8-year Treasury note has a yield of 8 percent. a. If inflation is expected to average 7 percent over the first four years, what is the expecte

> Assume that the interest rate on a one-year Treasury bill is 6 percent and the rate on a two-year Treasury note is 7 percent. a. If the expected real rate of interest is 3 percent, determine the inflation premium on the Treasury bill. b. If the maturity

> Find the default risk premium for a debt security given the following information: inflation premium – 2.5 percent, maturity risk premium = 2.5 percent, real rate = 3 percent, liquidity premium = 1.5 percent, and nominal interest rate = 14 percent.

> Assume investors expect a 2.0 percent real rate of return over the next year. If inflation is expected to be 0.5 percent, what is the expected nominal interest rate for a one-year U.S. Treasury security?

> A country in Southeast Asia states its gross domestic product (GDP) in terms of yen. Last year its GDP was 50 billion yen when one U.S. dollar could be exchanged into 120 yen. a. Determine the country’s GDP in terms of U.S. dollars for last year. b. Assu

> A nation’s gross domestic product (GDP) is stated in U.S. dollars at $40 million. The dollar value of one unit of the nation’s currency (FC) is $0.25. a. Determine the value of GDP in FC’s. b. How would your answer change if the dollar value of one FC in

> A nation’s gross domestic product is $600 million. Its personal consumption expenditures are $350 million and government purchases of goods and services are $100 million. Net exports of goods and services amount to $50 million. a. Determine the nation’s

> Assume some of the data provided in Problem 5 changes next year. Specifically, government purchases of goods and services increase by 10 percent; gross private domestic investment declines by 10 percent; and the imports of goods and services drop to $6 b

> The components that comprise a nation’s gross domestic product were identified and discussed in the chapter. Assume the following accounts and amounts were reported by a nation last year. Government purchases of goods and services were $5.5 billion; pers

> Assume personal income was $28 million last year. Personal outlays were $20 million and personal current taxes were $5 million. a. What was the amount of disposable personal income last year? b. What was the amount of personal saving last year? c. Calcul

> 1. Before World War I, the international monetary system operated mostly under which type of standard? a. U.S. dollar standard b. Euro standard c. Gold standard d. Diamond standard 2. Which of the following currencies is not included in the current

> Personal income amounted to $17 million last year. Personal current taxes amounted to $4 million and personal outlays for consumption expenditures, non-mortgage interest, and so forth were $12 million. a. What was the amount of disposable personal income

> How would your answer change in Problem 1 if the gross domestic product had been $14 million? Data from Problem 1: A very small country’s gross domestic product (GDP) is $12 million. If government expenditures amounted to $7.5 million and gross private

> Following are data relating to a nation’s operations last year. Capital consumption allowances…………………………………………$150 million Undistributed corporate profits………………………………………………40 million Personal consumption expenditures …………………………………….450 million Personal

> A very small country’s gross domestic product (GDP) is $12 million. If government expenditures amounted to $7.5 million and gross private domestic investment is $5.5 million, what would be the amount of net exports of goods and services?

> Assume that last year the Australian dollar was trading at $.5527, the Mexican peso at $.1102, and the British pound was worth $1.4233. By this year the U.S. dollar value of an Australian dollar was $.7056, the Mexican peso at $.0867, and the British pou

> Assume that five years a euro was trading at a direct method quotation of $.8767. Also assume that recently the indirect method quotation was .8219 euros per U.S. dollar. a. Calculate euro “currency per U.S. dollar” five years ago. b. Calculate the “U.S

> Assume a U.S. dollar is worth 10.38 Mexican Pesos and .64 euros. Calculate the implied value of a Mexican Peso in terms of a euro.