All Matches
Solution Library
Expert Answer
Textbooks
Search Textbook questions, tutors and Books
Oops, something went wrong!
Change your search query and then try again
Toggle navigation
FREE Trial
S
Books
FREE
Tutors
Study Help
Expert Questions
Accounting
General Management
Mathematics
Finance
Organizational Behaviour
Law
Physics
Operating System
Management Leadership
Sociology
Programming
Marketing
Database
Computer Network
Economics
Textbooks Solutions
Accounting
Managerial Accounting
Management Leadership
Cost Accounting
Statistics
Business Law
Corporate Finance
Finance
Economics
Auditing
Ask a Question
AI Study Help
New
Search
Search
Sign In
Register
study help
business
corporate finance
Questions and Answers of
Corporate Finance
Using the same assumptions as in Problem 26.12, compute the 10-day 95% VaR for a claim that pays $3m each year in years 7–10.In Problem 26.12Suppose the 7-year zero-coupon bond has a yield of 6%
Assuming a $10m investment in one stock, compute the 95% and 99% VaR for stocks A and B over 1-day, 10-day, and 20-day horizons.
Assuming a $10m investment that is 40% stock A and 60% stock B, compute the 95% and 99% VaR for the position over 1-day, 10-day, and 20-day horizons.
What are 95% and 99% 1-, 10-, and 20-dayVaRs for a portfolio that has $4m invested in stock A, $3.5m in stock B, and $2.5m in stock C?
Using the same assumptions as in Example 26.3, compute VaR with and without the mean, assuming correlations of −1, −0.5, 0, 0.5, and 1. Is risk eliminated with a correlation of −1? If not, why
Using the delta-approximation method and assuming a $10m investment in stock A, compute the 95% and 99% 1-, 10-, and 20-day VaRs for a position consisting of stock A plus one 105-strike put option
Repeat the previous problem, only use Monte Carlo simulation.
Compute the 95% 10-day VaR for a written strangle (sell an out-of-the-money call and an out-of-the-money put) on 100,000 shares of stock A. Assume the options have strikes of $90 and $110 and have 1
Using Monte Carlo, compute the 95% and 99% 1-, 10-, and 20-day tail VaRs for the position in Problem 26.2.
The firm has a single outstanding debt issue with a promised maturity payment of $120 in 5 years. What is the probability of bankruptcy? What is the credit spread?
Consider two firms, one with an FF rating and one with an FFF rating. What is the probability that after 4 years each will have retained its rating? What is the probability that each will have moved
Suppose that in Figure 27.6 the tranches have promised payments of $160 (senior), $50 (mezzanine), and $90 (subordinated). Reproduce the table for this case, assuming zero default correlation.
Repeat the previous problem, only assuming that defaults are perfectly correlated.
Using Monte Carlo simulation, reproduce Tables 27.10 and 27.11. Produce a similar table assuming a default correlation of 25%.
Following Table 27.10, compute the prices of first, second, and Nth-to-default bonds assuming that defaults are uncorrelated and that there are 5, 10, 20, and 50 bonds in the portfolio. How are the
Repeat the previous problem, assuming that default correlations are 0.25.
Suppose the firm issues a single zero-coupon bond with maturity value $100.a. Compute the yield, probability of default, and expected loss given default for times to maturity of 1, 2, 3, 4, 5, 10,
Suppose the firm issues a single zero-coupon bond with time to maturity 3 years and maturity value $110.a. Compute the price, yield to maturity, default probability, and expected recovery (E [BT|
Suppose the firm issues a single zero-coupon bond. a. Suppose the maturity value of the bond is $80. Compute the yield and default probability for times to maturity of 1, 2, 3, 4, 5, 10, and 20
Repeat the previous problem, only compute the expected recovery value instead of the default probability. How does the expected recovery value change as time to maturity changes?
Suppose that there is a 3%per year chance that the firm’s asset value can jump to zero.Assume that the firm issues 5-year zero-coupon debt with a promised payment of $110. Using the Merton jump
Suppose the firm has a single outstanding debt issue with a promised maturity payment of $120 in 5 years. Assume that bankruptcy is triggered by assets (which are observable) falling below $40 in
Repeat the previous problem, except that the time to maturity can be 1, 2, 3, 4, 5, 10, or 20 years. How does the bond yield change with time to maturity?
Consider a firm with an F rating.a. What is the probability that after 4 years it will still have an F rating?b. What is the probability that after 4 years it will have an FF or FFF rating?c. From
As productive resources and technological know how increase, a nation's production-possibility curve shifts outward. Use a production-possibility curve to show how resource growth and
Suppose federal, state, and local governments in the United States were to engage in a massive campaign to deal with AIDS, drug abuse, and other health-related problems. The increase in government
Explain why interest payments by the federal government would still be a large share of federal expenditures even if the federal government does not run a deficit again for several years.
The proportion of the population over 65 has been increasing and is expected to increase further. How does an aging population affect a state government's expenditures? Which state programs are
The following table shows how the total social benefit and total social cost of summer outdoor concerts in Central City vary with the number of performances.
a. Suppose the marginal social cost of television sets is $100. This is constant and equal to the average cost of television sets. The annual demand for television sets is given by the following
A prominent senator has calculated the total social benefit of the current amount of space exploration at $3 billion per year. The total social cost of space exploration is currently only $2 billion.
Suppose perfect competition prevails in the market for hotel rooms. The current market equilibrium price of a standard hotel room is $100 per night. Show that the current market equilibrium is
The supply of paper is described by the following equation: Qs = 5,000P where Qs is tons supplied per year and P is the price per ton. The demand is described by QD = 400,000 – 1,000P where QD is
The following data show how the marginal external benefit and marginal private benefit associated with a soil treatment agent to control Japanese beetles vary with the gallons of the control agent
The EPA wants to reduce emissions of sulfur dioxides from electric power-generating plants by 20 percent during the next year. To achieve this goal, the EPA will require each power-generating plant
Instead of using regulations to achieve the 20 percent reduction in emissions discussed in the preceding problem, suppose the EPA requires each of the five emitters to pay a fee of $450 for each ton
Economists argue that there is an efficient amount of pollution abatement. Explain why the efficient amount of abatement is unlikely to be either zero or 100 percent. List all the information that
Suppose the marginal cost of a pure public good increases as more is purchased by a community. Prove that the Lindahl equilibrium will result in a budget surplus at the efficient annual output of the
Suppose the services of a road are subject to congestion after 50,000 vehicles per hour enter the road. Assume that it is feasible to price road services on an hourly basis. Use a graph like that
The following table shows how the marginal benefit enjoyed by John, Mary, Loren, and all other consumers of outdoor rock concerts varies with the number made available by a city government per
The average cost of landscaping services for members of a condominium community is $350 per week. Assume that the quantity of landscaping services is perfectly correlated with the number of gardeners
Instead of all residents having identical marginal benefit schedules, themarginal benefit per gardener varies for five residents according to the following table:Marginal Benefit for Each GardenerIf
The example of logrolling used in the text assumes that the transactions costs of vote trading are zero. Suppose instead that voters A and C have to incur expenditures equal to $60 per week to reach
Two alternative programs to save 50 more lives per year entail providing more cardiac intensive care facilities and redesigning dangerous highway interchanges. The price of a new cardiac intensive
Suppose a proposed new road to be constructed in North Carolina between Raleigh and Morehead City will lower the average cost per trip by car from $5 to $4. Currently, 500,000 trips are made between
A new tax is levied on airline profits to finance improvements in the nation's airports. The current market rate of interest is 8 percent. However, airline profits are subject to a 50 percent tax. A
A cost-benefit analysis of a new irrigation project indicates that the net benefits (B C) of the project in each of the first four years will be $2 million. Thereafter, the project will yield
A workshop designed to retrain workers 55 years of age and older who have lost their jobs is proposed. Suppose the workshop will increase the income of each participant by $1,000 per year for a
Suppose bread is subsidized in a small Caribbean nation with a high percentage of citizens who live in poverty. The subsidy is paid to suppliers of bread by the government in the amount of 50 pesos
Suppose low-income people are given vouchers worth $200 per month that they can use only to pay rent on housing. Use indifference curve analysis to show how the person could be made as well off with
A needy family consisting of a mother and three children currently receives cash benefits that average $12 per day. The mother of this family is allowed to earn an average of $4 per day before her
A proposal for a negative income tax is designed to provide an income guarantee for each person, irrespective of his age or status, of $3,000 per year. Thus, a family of four would have an income
Get the directions for the Federal Income Tax or go to www.irs.gov to obtain the tables for the EITC for the current year. Explain how the program increases earnings for low-income workers and
A middle-income worker with a dependent spouse older than the normal retirement age retired in January 2004. In the year prior to retirement, her gross monthly earnings are $1,500. Her Social
Suppose the real rate of growth of wages subject to Social Security taxes is expected to average 1 percent per year during the next 40 years. Assuming that the Social Security tax rate remains
Use the data from Problem 1 to plot the worker's daily money income-leisure trade-off line. To do so, calculate her daily pension and assume 150 working hours in a month. Assume that the worker is
Suppose the average Social Security benefits in the nation are $12,000 per year. The number of Social Security pension recipients is currently 50 million. There are 150 million workers in the
The current tax rate paid by employees in a company on their income is 30 percent. Currently, the employer provides workers with a health insurance policy that is worth $3,000 per year. a. Assuming
The graph on the next page shows the supply and demand for health care in the nation. The demand curve reflects the marginal social benefit of health care while the supply curve reflects the marginal
Use the graph from Problem 2 to show the loss in efficiency that results from third-party payments.Show how the loss in net benefits from overallocation of resources to health care can be reduced by
One method commonly used by both governments and private health insurers to control the growth in health care spending are limits to reimbursement to providers. How can these limits to reimbursement
Suppose you currently earn taxable income of $100,000 per year. You are subject to an MTR of 50 percent. Currently, your ATR is 35 percent. Calculate your annual tax. Calculate the extra tax that you
The payroll tax for unemployment insurance in a certain nation taxes all wages up to a maximum per worker of $30,000 at a 5 percent flat rate. What are the marginal and average tax rates on the wages
A large city currently provides free water service to residents. The marginal social cost of making a gallon of water available per month is estimated to be 5 cents no matter how much water is used.
Indicate whether you agree with the following statement, and give your reasons for doing so: "If the beltline surrounding the city of Raleigh were a pure public good, efficiency would require that
Indicate how each of the following could impact tax evasion and explain why the effect takes place: a. An increase in MTRs. b. A decrease in MTRs. c. An increase in the complexity of the tax code. d.
The annual demand for liquor in a certain state is given by the following equation: QD = 500,000 – 20,000P Where P is the price per gallon and QD is quantity of gallons demanded per year. The
Figure 11.11 shows that a tax on clothing can reduce the price of food. Suppose that after the tax on clothing consumption is imposed, another tax is levied on the consumption of food. For example,
The price elasticity of demand for wine is estimated to be 1 at all possible quantities. Currently, 200 million gallons of wine are sold per year, and the price averages $6 per bottle. Assuming that
Suppose you had to design a system of taxation for a republic of the former Soviet Union that was transforming its economy into a modern Western-style mixed economy. What criteria would you consider
Suppose the supply of housing construction is infinitely elastic at a price of $150 per square foot. Currently 1 million square feet are built per month. If the price elasticity of demand for housing
The current market rate of interest is 8 percent. At that rate of interest, businesses borrow $500 billion per year for investment and consumers borrow $100 billion per year to finance purchases. The
The classical economists argued that budget deficits would not affect current spending. Suppose the federal government increases its purchases of goods and services by $100 billion this year.
Trace the implications of a government budget surplus on the following: a. National saving b. Interest rates c. Private investment d. Economic growth e. Future living standards When tracing the
Suppose gross saving in the United States is 20 percent of Gross National Product (GNP). If business saving is 15 percent of GNP and government saving is 4 percent of GNP, what percent of GNP is
Mary has earnings of $50,000 this year. She also has been fortunate because the market value of the condominium she purchased this year for $100,000 has increased by 5 percent. Assuming that the rate
An estimate of the efficiency-loss ratio of taxes on labor income is 15 percent. The efficiency-loss ratio of taxes on capital income is estimated to be 45 percent. Assuming that these estimates are
Suppose the current market rate of interest is 8 percent. John is subject to a 31 percent marginal tax rate on his interest income. What is John's equilibrium marginal rate of time preference?
Suppose leisure is an inferior good for a worker. Set up this worker's indifference curves for money income and leisure, and derive the income and substitution effects of a tax-induced wage decline.
Empirical studies show that the market labor supply of prime-age males (between the ages of 25 and 55) in the United States is close to perfectly inelastic with respect to the labor compensation. If
A taxpayer faces the following MTRs for labor income:The taxpayer can earn $10 per hour. In the absence of any taxes, he would work an average of eight hours a day. Show how the tax affects his
Suppose the expected inflation rate is 4 percent this year and the nominal interest rate is 8 percent. Assuming that a taxpayer is subject to a 28 percent MTR, show how an increase in the rate of
A single worker has gross income subject to tax of $40,000. She makes a $5,000 contribution to a special tax-deferred retirement plan offered by her employer. The worker claims one personal exemption
A worker lives in a state that has its own income tax. The worker is in the 31 percent federal tax bracket. In addition, he is subject to a 9 percent MTR for his state income tax. Assume that
Suppose the current progressive income tax structure is scrapped and replaced by a 15 percent tax on all income with no exemptions or deductions allowed except that the first $10,000 of income will
A corporation has $7 million in equity. During the tax year it takes in $4 million in receipts and earns $2 million in capital gains from sale of a subsidiary. It incurs labor costs of $1 million,
A corporation has $5 million in assets and $3 million in debt. During the year it takes in $750,000 in net revenue after deduction of all costs except for interest and incurs interest expenses of
Suppose the corporate profits are subject to a 34 percent MTR but the profits of noncorporate investment are not taxed. The gross return to corporate investment is 10 percent. Calculate the net
Suppose the corporate income tax were eliminated and corporate income allocated to shareholders on a pro rata basis according to their proportion of outstanding stock. How would such a change in tax
Suppose the corporate income tax were eliminated and the revenue lost was made up by increasing the payroll tax rate on labor earnings. What would be the impact on labor and capital markets of such a
Suppose two workers earn labor incomes of $20,000 per year in each of three tax accounting periods. One worker saves 20 percent of her labor earnings in each of the first two periods and spends all
Your state has a retail sales tax of 10 percent but it exempts food, prescription drugs, and all services including housing services, repair services, and consumption of electricity and other public
Suppose legislation were passed that abolished all state and local sales taxes and replaced them with one uniform sales tax on all consumption including consumption of services. The federal
A furniture manufacturer sells $500,000 worth of tables, chairs, and other items in a given year. The manufacturer earns a profit of $100,000 that year. His purchase invoices indicate that he bought
Suppose the current corporate income tax in the United States is replaced with a general equal-yield consumption-type VAT. What would the impact of such a tax reform be for labor markets and capital
The annual return to savings is currently $100 billion per year in a certain nation. The estimated value of wealth in the nation is $1 trillion. Calculate the percentage gross return to savings.
A parcel of land is expected to yield annual rents equal to $10,000 per year forever. If the market rate of interest is 10 percent, calculate the market price of the parcel. Suppose you purchase the
Suppose, as a result of the imposition of a 5 percent local property tax, the rent on a parcel of property increases from $12,000 to $12,500 per year. Assuming that the current rate of discount is 8
Go to Table 17.1 and find the property tax rate for the largest city in your state. Is that rate above or below the national average? If it is above the national average, what effect on property
The average cost of employing each police officer per year is $30,000 for a small town. The current population of the town is 1,000. Calculate the per capita cost per police officer. Explain why
Showing 15900 - 16000
of 31985
First
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
Last