Calculate the YTM on a bond priced at $1,036 which has 2 years to maturity, a 10% annual coupon rate, and a return of $1,000 at maturity. The data is as follows; N = 2; PV = $1,036; PMT = …
In the early 1980s, the Treasury yield curve had a severe downward slope with short-term yields near 20% and long-term yields below 15%. Explain how such a pattern might occur. Campbell (1995) has stated that yield curve of treasury is …
Given the opportunity to invest in one of the three bonds listed below, which would you purchase? Assume an interest rate of 7%. Bond Face Value Coupon Rate Maturity Price A $1,000 4% 1 year $990 B $1,000 7.5% 17 …
The Marx Brewing Company recently installed a new bottling machine. The machine’s initial cost is $2,000, and can be depreciated on a straight line basis to a zero salvage in 5 years. The machine’s fixed cost per year is $1,800, …
Explain the use of real and nominal discount rates in discounting cash flows. Which is used more often and why? Hussey & Hussey (1999) have pointed out the important thing to remember is, real cash flows must only be discounted …
Planned Break-Even Point by different businesses. There are series of certain break-even points that every business has planned to reach in certain time frame. The first breakeven point is the cash break-even point that can be followed by the …
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What does Break-Even Point mean? The Break-even point is defined as the level of revenue or earning that fully covers the level of costs. In this point no revenues are generated but the cots are covered which means no lose …
Concept of Marginal Cash Flows. Yes, in case the average revenue of business is less than the average cost then the business is at loss which means it is unable to cover its costs. And this statement is true when …
Explain Sensitivity Analysis and Scenario Analysis. The Sensitivity analysis determines the single variable over the variables in broad range and values while in the scenario analysis the limited range of the variable value are determined and assessed. The analysis is …
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How do you define Forecasting Risk? Forecasting risk is defined as the probability regarding financial decision failures that may rise due to certain circumstances. Such cases occur in case of the new product or project launch where the assessment of …
