Business > CASE STUDY > FINC300 Week 6.docx FINC300 Week 6 Homework Solutions American Military University F (All)
FINC300 Week 6.docx FINC300 Week 6 Homework Solutions American Military University F
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FINC300 Week 6.docx FINC300 Week 6 Homework Solutions American Military University FINC300: Foundations of Financial Management Week 6 Homework Solutions Exercise 1 from Chapter 20 on page 367... -368 Conclusion: (a) Yield to maturity = 5.547% Modified duration = 5.68 Duration: 5.68*(1+5.547%) = 5.68*(1+0.05547%) = 5.68*1.05547 Duration = 6.0 years (b) The modified duration and the duration are reduced since the life of the bond is shorter. Although the market rate has dropped, it is clear that the life factor impacts more on modified duration than the market rate factor. On 21 February 2015, the value will be PV = 102.5% with a modified duration = 5.029. Duration: 5.029*(1+Yield to maturity: 5.0%) = 5.029*(1+0.05%) = 5.029*1.05 Duration = 5.281 years Exercise 1 from Chapter 22 on page 403 Conclusion: The EPS will have to be equal to the following in year 3 to get a 12% return on investment: Va. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Show More]
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