The annual growth rate is I in the following equation: $1(1 + I)10 = $2. We can find I in the equation above as follows: Using a financial calculator input N = 10, PV = -1, PMT = 0, FV = 2, and I/YR = ? Solving for I/YR you obtain 7.18%. Viewed another way, if earnings had grown at the rate of 10% per year for 10 years, then EPS would have increased from $1.00 to $2.59, found as follows: Using a financial calculator, input N = 10, I/YR = 10, PV = -1, PMT = 0, and FV = ?. Solving for FV you obtain $2.59.
A company issued a 30-year, $1,000 par value bond that has 10.85% coupon rate. Coupons are paid out semi-annually and the relevant interest rate is 9% compounded semiannually. a. (3 points) What was the value of this bond when it was issued? PMT = (.1085/2)*1000=54.25 N = 60 R = 0.09/2=0.045 (or 4.5 for calculator purposes) FV = 1000 PV =?
One of the choices is a corporate bond with a coupon rate 2%, 2-year maturity with par value of £1000 paying annual coupon payment. Suppose
4. 2 Abel/Bernanke • Macroeconomics, Fifth Edition 5. The most direct effect of an increase in the growth rate of average labor productivity would be an increase in (a) the inflation rate. (b) the unemployment rate. (c) the long–run economic growth rate.
Look at the results in Table 1. In general, what is the order of risk for the four risky asset classes? What happens to the reward-to-risk ratio for the different asset classes as the holding period increases? Is this pattern consistent with the change in the optimal allocations for Small Stocks as the holding period increases (shown in Table 2)? Explain.
C) the natural rate of unemployment will decrease. D) the natural rate of unemployment will increase. Answer: ___ Page 1 of 14 3) For this question, assume that the Phillips curve equation is represented by the following equation: πt - πt-1 = (μ + z) - αut. Given this information, the natural rate of unemployment will be equal to: A) μ + z B) α(μ + z) C) (μ + z)/α D) (μ + z - α) E) 0 Answer: ___ 4)
The LM Curve will see a shift to the left and decrease the value of "Y" if the IR is higher than the ER of the market. The GDP is increasing in value and there will be an increase of savings.. If the IR was below the equilibrium, the opposite of the previously stated would occur. The LM Curve would see a shift to the right, therefore increasing the value of "Y". The GDP value would then decrease, due to the move from Point A to C, and increase employment which would decrease savings.
ALTERNATIVE PROBLEMS AND SOLUTIONS ALTERNATIVE PROBLEMS 11- 1A. (Individual or Component Costs of Capital) Compute the cost for the following sources of Financing: a. A bond that has a $1,000 par value (face value) and a contract or coupon interior rate of 12%. A new issue would have a flotation cost of 6% of the $1,125 market value. The bonds mature in 10 years.
According to the calculated ratios in Table-1, SSB had the following major trends in profitability during the time of 1991 to 1993: Decreasing return on equity (ROE) – shareholder return Gradual & unsteadily decreasing return on assets (ROA) – managerial efficiency Decreasing net non interest margin ? less profit earned on non-interest banking components Increasing earnings spread ? have established effective processes of borrowing and lending money with little immediate threat of competitors Unfavorably increasing operating efficiency ratio – there is an excess of operating cost in relation to operating revenues generated by SSB. Declining credit risk/depositor risk ? decline of bad loans, increased market values of good loans relative to amount of deposits.
Question 3 Which price increase is needed to offset the profit impact of the increased raw material costs (assuming that volumes are constant)? Which price decrease will result from instituting price-flex (assume a best case and a worst case)? Answer 3 The selling price would increase by offsetting the raw material cost which is given in the “Appendix A” which shows that increase in the price by 6.5% would result in the positive side and a reductioncompany from reduction in the price. Understanding all this is done with respect to the case material. The volume is a constant which is assumed at 80% in the analysis of the price.