1.In 2007 Carnival Cruise Lines decided to sell some new bonds (something about fixing a big ship). They sold the bonds for $1,000 (face value) with a 20 year maturity and an 7% coupon. Eight years have passed. Interest rates on similar bonds have increased to 9%. If an owner attempts to sell her/his Carnival bond bought for $1,000 in 2007, what should they expect to receive for it in the secondary market?

2.In your new position as head accountant (so OK - you're the only accountant but it will sound better on your resume) at Frankenstein, Inc. (motto: "You just think they're dead!") you note that last month on July 2 , 2015 they bought "railroad track" for $60,000 (youdon'twant to know what they will do with that "track") anyway your job is to lower their corporate taxes if possible. You decide to use MACRS for depreciation How much can they take for these three years? (6 points) 2015, 2019, 2022.

3.Continuing with question 2 above. Let's say that interest rates dropped to 4% (didn't go up to 9%) and they will stay there forever. What would be the value of Carnival's bonds in 2017?

4.You've always wanted to buy a home and after looking in North Wilmington,Rehobothand Dewey you are fairly disappointed - the prices are just too high. A friend mentions Smyrna so you take a look at one of the fastest growing areas in the State and are surprised that prices are still reasonable. The house you find is $240,000. You can put $30,000 down and will finance the rest using a 20 year mortgage. The bank will charge you 4% interest. What will be your annual mortgage payment?

5. The Going to the Sun Road in Glacier National Park - located in northwestern Montana - is one of the most spectacular drives in North America. Unfortunately the road needs to be resurfaced due to many harsh winters. The State of Montana has decided to sell state bonds to cover the needed repairs, A Montana state savings bond can be converted to $100 at maturity six years from purchase. If the state bonds are to be competitive with U.S. savings bonds, which pay 6% annual interest (compounded annually), at what price must Montana sell its bonds? (Assume no cash payments on savings bonds prior to redemption.)

6. Zombies, Inc. is suing Frankenstein, Inc. for copyright infringement (Zombies maintains they came up with the motto in problem 1 first!). OK, this has absolutely nothing to do with this problem I just thought I'd throw it in. Anyway, you've left Frankenstein for Zombies (well you do understand the industry after all) and are now preparing Zombies current Income Statement. You are down to the lines "tax" and "net profit after tax" and therefore need to calculate Zombies federal tax. Here's the data you have been working with: Sales: $1,300,000; cost of goods sold: $745,000; G&A: $300,000; advertising: $75,000. Zombies needed some additional cash a couple of year ago - something about replacing railroad track - .and sold junk bonds with a 20 year maturity in the amount of $500,000 with a coupon of 14%. They had invested in Disney (there was something about the song, "It's a small world" that they thought could be used to drive humans crazy) and received a dividend check from Disney of $20,000. Their capital structure includes both preferred and common stock and they paid $10,000 and $15,000 respectively in dividends. Given all that I need you to tell me three things: what was their federal tax bill, what was their average tax rate, what was their marginal tax rate

7. Of all the types of investments Henry could have chosen, he decided to try real estate because, according to Henry, "as everyone knows, real estatenevergoes down". Yea, right. Last year he bought an apartment house in Camden, N.J. (Of all the places ...) Paid $400,000. One year later he decided to sell - for $360,000. OK during the year he did collect rent of $12,000 but that was more than offset by the $20,000 he had to pay to replace the roof (assume no other income or expenses). Given this data, what was the rate of return on this dog of an investment? (Hint: this is NOT a time value problem).

8. Risk & return is a classic item in finance. You would like to estimate what the return onWall-Mart stock could be given its beta of 0.42. Other data you have collected: the rate of return on 90 day T-Bills is 3%, on 5 year T-Notes it 3% and on the "long bond", the 30-year T- Bond = 5.5%. The Prime is 7%, LIBOR is 6.5% and the average return on the overall stock market is estimated to be 12%. OK again, what do you expect the rate of return on G.E.'s stock to be?

9.

You just received your tax refund (wow - it's so nice of you to lend the U.S. government money at zero percent interest!) and you are looking to add a stock to your portfolio - you just don't want to overpay - so you decide to estimate the price of your next stock using the Gordon Model. You are looking at XYZ Corp (OK - so I ran out of dead things) and you have collected some data (some of which might actually be helpful):

Current Ratio = 2.86; Quick Ratio = 1.04; TIE = 7.10; Prime = 7%; 90 Day T-Bills = 3.20%; ROA = 8%; Next Dividend to be paid = $3.20; Retained Earnings Balance (current) = $672 million; Earnings Growth Rate = 4.5%; Bond Rating: AA.

You do have some standards for any stock however. You have established a required rate of return for any stock added to your portfolio to be 13%. With this information at your disposal, what should you expect to pay for a share of XYZ?

10.Looking at a list of beta coefficients you spot a number of stocks as possible buys for your new stock portfolio. You have $80,000 to invest. You have decided to have just three stocks in your portfolio (this will make it easier to follow than a portfolio of more stocks). You have selected two already: GE with a beta of 1.40 and Bank of America with a beta of 1.78. You have invested $20,000 in each. For the final selection you are looking at Ford with a beta of 1.56, JP Morgan Chase with a beta of 1.64, Intel with a beta of 0.99 and PepsiCo with a beta of 0.35. You would like the overall beta of your portfolio to be as close to "the market" or "average stock" as possible. Make your third selection and calculate the beta of your three-stock portfolio (and yes, I need to see the formula!)

11.Today is your birthday and you decide to start saving for college. You will begin college on your 18th birthday and will need $10,000 per year at the end of each of the next 4 years (after that 18th birthday - isn't it nice the college lets you pay at the end of the year!) You will make an identical deposit each year up to and including the year you begin college. All your money will earn 12% interest including the time you are in college. If a deposit of $3,742.45 will allow you to reach your goal (gee, I love this question!) - are you ready for this?! How old are you now? (note points will only be given for work shown - no pure guesses please).

Please show all work. !