Interest Rate Risk and Ratio Analysis -Problem 19-9 and 16-13 - 73558

Solution Posted by
smarttutor

smarttutor

Rating : (2)A
Solution Detail
Price: $4.99
  • From: Business, Marketing
  • Posted on: Sat 30 Aug, 2014
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description

 

Problem 16-9 Interest rate risk; Two years ago your corporate treasurer purchased for the firm a 20 year bond at its par value of $1,000. The coupon rate on this security is 8 percent. Interest payments are made to bondholders once a year. Currently, bonds of this particular risk class are yielding investors 9 percent. A cash shortage has forced you to instruct your treasurer ot liquidate the bond. a. At what price will your bond be sold? Assume annual compounding. b. What will be the amount of your gain or loss over the original purchase price? c. What would be the amount of your gain or loss had the treasurer originally purchased a bond with a 4-year rather than a 20 –year maturity? (Assume all characteristics of the bonds are identical except their maturity periods.) d. What do we call this type of risk assumed by your corporate treasurer?

 

Problem 16-13 : Ratio Analysis Assuming a 360-day year, calculate what the average investment in inventory would be for a firm, given the following information in each case. a. The firm has sales of $600,000, a gross profit margin of 10 percent, and an inventory turnover ratio of 6. b. The firm has a cost-of-goods sold figure of $480,000 and an average age of inventory of 40 days. c. The firm has a cost-of-goods-sold figure of $1.15 million and an inventory turnover rate of 5. d. The firm has a sales figure of $25 million, a gross profit margin of 14 percent, and an average age of inventory of 45 days.

Solution Description

Interest R

Attachments
Interest Rate Risk and Ratio Analysis -Problem 19-9 and 16-13.doc
Interest Rate R...