Consider the following average annual returns: Average Return Investment Small Stocks 23.5% S&P 500 13.1% 7.5% Corporate Bonds Treasure Bonds Treasury Bills What is the excess return for corporate bonds? 6.8% 4%
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- Consider the following average annual returns: Investment Average Return 23.4% Small Stocks S&P 500 13.7% 7.4% Corporate Bonds Treasure Bonds Treasury Bills What is the excess return for corporate bonds? O A. 0% B. 3.1% C. 6.2% O D. 1.6% 6.1% 4.3%Consider the following information from 2017. Item T-bills Return 3.6% Corporate bonds 4.7% Stocks Inflation 7.3% 1.6% What is closest to the real return on corporate bonds? 1% 2% 3% 4%B. Complete the information below using Bonds. Redemption Value (F) Conversion per year (m) Bimonthly Coupon Payments (k) Bond Rate (r) 11. 18% P7.50 P680 Quarterly 11% 12. P900 Quarterly 12.8% 13. P1,300 Bimonthly 12% 14. 15. Annually 15% P105.00
- The following table showing the cash flows for TIPS bonds. Inflation in Year Just Ended Time 0123 2.25% 5.00 3.50 Par Value $ 1,000.00 1,022.50 1,073.63 1,111.20 Coupon Payment + Principal Repayment = $ 46.01 $0 0 48.31 50.00 1,111.20 Required: a. What is the nominal rate of return on the bond in year 2? If real rate of return is 4.50% per annum b. What is the real rate of return in year 2? c. What is the nominal rate of return on the bond in year 3? d. What is the real rate of return in year 3? Total Payment $46.01 48.31 1,161.21Assume the following Risk Premiums: DRP ? LP = 0.25% MRP =1.15% 10-year Government bonds yield 4.65% 10-year corporate bonds yield 6.75%. What is the default risk premium on corporate bonds?Using the table below, Compute the convexity measure (in years) for bond 2 Bond 1 Bond 2 Coupon Yield to maturity Maturity (in years) Par value 6% 7% 6% 6% 4 $100 $100 $100 $108 Price O A. 14.763 12.652 OC. 13.312 OD. 13.927
- EXAMPLE 10: From the following, compute Debt Equity Ratio: Equity Share Capital 1,00,000 General Reserve 80,000 6.5 % Debentures 75,000 Current Liabilities 90,000 o add notes COMMENTS OTESIf 10-year T-bonds have a yield of 7.1%, 10-year corporate bonds yield 9.7%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? O a. 2.60% O b. 2.20% O c. 3.00% O d. 5.80% O e. 0.90%Company CouponRate MarketPrice TimeSince LastInterest AccruedInterest Commissionper Bond BondsSold TotalPrice Company 4 10.925% 77.00 85 days $ $11.00 15
- Assuming the bonds are trading at face value. Using the table below, what is the required rate of return on debt? Security Security #1 Security #2 Security #3 Security #4 4.1% 3.9% O 5.9% 3.3% Face Value $5,000,000 $6,000,000 $4,000,000 $5,000,000 Coupon 8% 2% 9% 6% YTM 4.0% 4.5% 3.8% 4.1%Calculate the debt-equity ITEM (in $ millions) Accounts Payable Long Term Debt Common Stock ($1 par) $4.6 Capital Surplus Retained Earnings 0.44 0.28 O 3.54 ratio by using the information below. 2022 $1.42 $4.33 0.51 $8.47 $7.26 O None of these options are correctSolvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Y8 20Υ7 20Υ6 20Y5 20Υ4 Net income $273,406 S367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders' equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4-20Y8 Return on total assets 28% Return on stockholders' equity 18% Times interest earned 2.7 Ratio of liabilities to stockholders equity 0.4 Required: 1.…