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ololo11 [35]
3 years ago
6

Jane Smith, MD, has had a great year in her pediatrics practice and has cash that she wants to invest. Her financial adviser sug

gests she buy a seven-year, $1,500 par value bond with an annual coupon rate of 10 percent and three years remaining to maturity. Dr. Smith decides to explore her options. She discovers that new, similarly risky bonds have an average annual rate of return of 12 percent. Bank certificates of deposit are returning 5 percent annually on average while a mutual fund investing in high-risk-growth stocks has an average annual rate of return of 20 percent. If Dr. Smith follows her financial adviser’s advice, what is the maximum amount she should pay for the bond? Explain your answer
Business
1 answer:
Arlecino [84]3 years ago
3 0

Answer: $1427.95

Explanation:

If Dr. Smith follows her financial adviser’s advice, the maximum amount that she should pay for the bond will be calculated thus:

This question can be solved using Excel.

Face value = $1500

Coupon rate = 10%

Years left = 3

Coupon = 10% × $1500 = $150

Yield to maturity = 12%

The bond price will be:

= PV(12%,3,-150,-1500)

= PV(0.12,3,-150,-1500)

= 1427.95

The bond price is $1427.95

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3 years ago
Using the capital asset pricing model (CAPM), Sun State determined that the required rate of return for a capital budgeting proj
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Answer:

2.2

Explanation:

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= 2.2

The (Market rate of return - Risk-free rate of return)  is also known as market risk premium and the same has applied.

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Information: You are employed as a network consultant at Network Design Consultants. Your company consists of 15 consultants who
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Some questions you can ask Harrison and Associates include:

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These will help you determine what kind of systems they need so that you can go about finding ways to satisfy these needs.

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<em>Find out more at brainly.com/question/20859690.</em>

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3 years ago
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Answer:

d. will have difficulty estimating the value of the highway.

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Cost-benefit analysis (CBA) sums the total cost associated with a project (activity) and compares this cost against the total benefits that would be generated. Thus, it helps in the decision-making process by comparing the net present value (NPV) of the cost of a particular project with the net present value (NPV) of its benefits.

In this context, the cost-benefit analysis of a highway would be difficult to conduct because analysts will have difficulty estimating the value of the highway.

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