CP
142 CHAPTER 3 Risk and Return An individual has $35,000 invested in a stock which has a beta of 0.8 and $40,000 invested in a st ...
Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13 percent, and the ri ...
144 CHAPTER 3 Risk and Return a.Use the data given to calculate annual returns for Bartman, Reynolds, and the Market Index, and ...
Mini Case 145 Merrill Finch’s economic forecasting staff has developed probability estimates for the state of the economy, and i ...
146 CHAPTER 3 Risk and Return k. The expected rates of return and the beta coefficients of the alternatives as supplied by Mer- ...
149 4 During the summer of 1999 the future course of interest rates was highly uncertain. Continued strength in the economy and ...
If you skim through The Wall Street Journal,you will see references to a wide variety of bonds. This variety may seem confusing, ...
Treasury bonds,sometimes referred to as government bonds, are issued by the U.S. federal government.^1 It is reasonable to assum ...
Coupon Interest Rate MicroDrive’s bonds require the company to pay a fixed number of dollars of interest each year (or, more typ ...
40 years, but any maturity is legally permissible.^3 Of course, the effective maturity of a bond declines each year after it has ...
of issue. If interest rates have risen, holders will turn in the bonds and reinvest the pro- ceeds at a higher rate. This featur ...
Although sinking funds are designed to protect bondholders by ensuring that an is- sue is retired in an orderly fashion, you sho ...
The cash flows from a specific bond depend on its contractual features as described above. For a standard coupon-bearing bond su ...
(4-1) Inserting values for our particular bond, we have Note that the cash flows consist of an annuity of N years plus a lump su ...
in the third row of Equation 4-1 with a simple or scientific calculator, although this would still be somewhat cumbersome. FINAN ...
Bond Valuation 159 cial, NPV, and OK. Then input Rate 0.1 or F3 and Value 1 C8:Q8. Then click OK to get the answer, $1,000. No ...
Now suppose interest rates in the economy fell after the MicroDrive bonds were issued, and, as a result, rdfell below the coupon ...
return would be 15 percent. To see this, calculate the price of the bond with 13 years left to maturity, assuming that interest ...
Figure 4-2 illustrates the following key points: Whenever the going rate of interest, rd, is equal to the coupon rate, a fixed- ...
You could substitute values for rduntil you find a value that “works” and forces the sum of the PVs on the right side of the equ ...
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