Case Study: Seeing the Financial Side of Business List the various types of US financial institutions and the primary function of each. Following are the details of different US financial institutions and their respective functions. Commercial Banks: Commercial banks provide …

List the various types of US financial institutions and the primary function of each. Read more »

Mini Case “Stock Valuation at Ragan Engines” Answers to all 6 questions from case study “Stock Valuation at Ragan Engines” provided.   Question 1: Calculate the value per share of the company’s stock at Ragan Engines.  Solution Total dividend paid …

Answers to all 6 questions from case study “Stock Valuation at Ragan Engines” Read more »

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 = …

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. Read more »

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 …

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. Read more »

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 …

Given the opportunity to invest in one of the three bonds listed below, which would you purchase? Assume an interest rate of 7%. Read more »

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, …

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. Read more »

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 …

Explain the use of real and nominal discount rates in discounting cash flows. Which is used more often and why? Read more »