StangWay Corp. stock is trading for $ 30 per share. StangWay has 24 million shares outstanding and a market debt-equity ratio of 0.41. StangWay's debt is zero coupon debt with a 5-year maturity and a yield to maturity of 12 % EAR(effective annual rate). Describe StangWay's equity as a call option. What is the maturity of the call option? years. What is the market value of the asset underlying this call option? $ What is the strike price of this call option? $ million (Round to 2 decimal places) (Round to 2 decimal places)

StangWay Corp. stock is trading for $ 30 per share. StangWay has 24 million shares outstanding and a market debt-equity ratio of 0.41. StangWay's debt is zero coupon debt with a 5-year maturity and a yield to maturity of 12 % EAR(effective annual rate). Describe StangWay's equity as a call option. What is the maturity of the call option? years. What is the market value of the asset underlying this call option? $ What is the strike price of this call option? $ million (Round to 2 decimal places) (Round to 2 decimal places)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The zero coupon bonds of JK industries has a market price of $318.46, a face value of $1,000 and a year to maturity of 6.69 percent. How many years is it until these bonds mature? Please show how I can solve this in Excel, thank you.
IN EXCEL! Assume you would like to estimate ABC Company's debt cost. ABC's bond has a semi-annual 5.25 % coupon rate and a Par value of $1,000, with a market price of 86 percent of the Par. Assume a number of years to maturity of 12 years. Estimate the cost of debt for ABC Company. Assume the same number of years to maturity of Question 1. You buy a zero-coupon to reach your goal of having $1,000,000.00 when the zero-Coupon bond matures. The yield of this Zero-Coupon bond is 6.25% compounded semiannually, how much must you invest today to achieve your goal? The face value of each zero-coupon bond is $10,000. IN EXCEL
Mertol Corporation has 7-year, 1000t par value bonds that make semiannual coupon payments. The current yield-to-maturity on the bonds 22,45% and the bond currently sells for 673,99t. a. What is the annual coupon rate on the bond? b. What is the current yield of the bond? What is the expected capital gains yield tor the next year? c. What is the effective YTM an investor will earn on Mertol bonds?
1) AzTurk Company is decided to issue 1,000 AZN par value bonds with an 12 % coupon paid semi-annually with a 5- year maturity. At the market, same type of bonds with same maturity and same risk level is trading at 1,100 AZN. Briefly explain how to calculate yield to maturity and current yield. What is the difference between yield to maturity and current yield?
MLK Bank has an asset portfolio that consists of $90 million of 30-year, 9 percent annual coupon, $1,000 bonds that sell at par. a-1. What will be the bonds’ new prices if market yields change immediately by ± 0.10 percent?a-2. What will be the new prices if market yields change immediately by ± 2.00 percent?b-1. The duration of these bonds is 11.1983 years. What are the predicted bond prices in each of the four cases using the duration rule?b-2. What is the amount of error between the duration prediction and the actual market values?
A stock is currently priced at $40. The risk-free rate of interest is 8% p.a. compounded continuously and an 18-month maturity forward contract on the stock is currently traded in the market at $38. You suspect an arbitrage opportunity exists. Which one of the following transactions do you need to undertake at time t = 0 to arbitrage based on the given information? Long the forward, short-sell the share and invest at risk-free rate Long the forward, borrow money and buy the share Short the forward, borrow money and buy the share Short the forward, short-sell the share and invest at risk-free rate
Assume that the current stock price is $50 per share, that call options can be purchased with an exercise price of $60 per share, that bank loans can be obtained for a 10 percent nominal rate, and that at expiration of the option in three months, the stock will either be valued at $30 or $70. Show that it is possible to replicate the stock payoff by borrowing and buying a call option.
The zero-coupon bonds of D&L Movers have a market price of $320, a face value of $1,000, and a yield to maturity of 9 percent. How many years is it until these bonds mature?
The zero coupon bonds of Plarkco, Inc. have a market price of $594.47, a face value of $1,000, and a yield to maturity of 8.87%. How many years is it until this bond matures?
a) You've entered into a long forward. The forward has 1.25 years to expiration. The continuouslycompounded risk-free rate of interest is 3.5%. The forward price is $83.50. The underlying assetprice is $81.70. Show whether the forward contract is your asset or liability. b)Suppose that both a call option and a put option have been written on a stock with an exerciseprice of $40. The current stock price is $42, and the call and put premiums are $3 and $0.75,respectively. Draw fully labelled profit diagrams of a long call and a short put. c)For the same call and put options as in question (a), calculate the profit to positions of both theshort call and the long put with an expiration day stock price of $43.
Fooling Company has a callable bond outstanding with a coupon of 10.2 percent, 25 years to maturity, call protection for the next 10 years, and a call premium of $50. What is the yield to call (YTC) for this bond if the current price is 109 percent of par value?
The zero coupon bonds of JK Industries have a market price of $511.26, a face value of $1,000, and a yield to maturity of 5.1 percent. How many years is it until these bonds mature? Assume semiannual compounding.

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