Problem $2-18$ Functions of Financial Markets $($LO$3)$ Problem $2-18$ Functions of Financial Markets $($LO$3)$

Consider the table shown below to answer the question posed in part $a.$ Parts $b$ and $c$ are independent of the given table.

a$.$ The price of Yum! Brands stock has risen to $$185.$ What is the market value of the firm's equity if the number of outstanding

shares does not change?

Note: Enter your answer in dollars not in billions of dollars.

b$.$ The rating agency has revised Catalytic Concepts' bond rating to A $($use Table $2\mathrm{.}2).$ What interest rate, approximately, would the

company now need to pay on its bonds?

Note: Enter your answer as a percent rounded to $1$ decimal place.

c$.$ A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed

price, and the other agrees to sell. Which one sells?

Consider the table shown below to answer the question posed in part a$.$ Parts b and c are independent of the given table.

Number of Share $($millions$)\backslash$times Stock Price $=$ Market Capitalization $($$ millions$)$

Callaway Golf $($ELY$)94\mathrm{.}2\backslash$times $27\mathrm{.}30=$ $ $2,572$

Alaska Air Group $($ALK$)123\mathrm{.}7\backslash$times $50\mathrm{.}70=$ $ $6,272$

Yum! Brands $($YUM$)301\mathrm{.}7\backslash$times $103\mathrm{.}07=$ $ $31,096$

Caterpillar Tractor $($CAT$)543\mathrm{.}3\backslash$times $186\mathrm{.}66=$ $ $101,412$

Microsoft $($MSFT$)7,560\backslash$times $242\mathrm{.}12=$ $ $1,830,427$

The price of Yum! Brands stock has risen to $$185.$ What is the market value of the firm$$s equity if the number of outstanding shares does not change?

Note: Enter your answer in dollars not in billions of dollars.

The rating agency has revised Catalytic Concepts$$ bond rating to A $($use Table $2\mathrm{.}2).$ What interest rate, approximately, would the company now need to pay on its bonds?

Note: Enter your answer as a percent rounded to $1$ decimal place.

A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed price, and the other agrees to sell. Which one sells?