Conifer Coal Co Finance Assingment Help With Solution

Posted on March 21, 2017

Conifer Coal Co Finance Assingment Help With Solution

 
1. As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in eight years, and have a coupon rate of 9.5% on a face value of $1,000. Currently, the bonds are selling for $872.
 
a. If you required return is 11% for bonds in this risk class, what is the highest price you would be willing to pay? (Hint: Use the PV function)
 
b. What is the yield to maturity on these bonds if you purchase them at the current price? (Hint: Use the RATE function)
 
c. If the bonds can be called in three years with a call premium of 4% of the face value, what is the yield to call on these bonds? (Hint: Use the RATE function)
 
d. Create a chart that shows the relationship of the bond’s price to your required return. Use a range of 0% to 15% with 0.5% increments in calculating the prices.

 

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  1. As an analyst at Churnem&Bernem Securities, you are responsible for making recommendations to your firm’s clients regarding common stocks. After gathering data on Denver Semiconductors, you have found that its dividend has been growing at a rate of 8% per year to the current (D0) $1.25 per share.  The stock is now selling for $24 per share, and you believe that an appropriate rate of return for this stock is 15% per year.

a.  If you expect that the dividend will grow at a 8% rate into the future, what is the highest price at which you would recommend purchasing this stock to your clients?

 

b. Suppose now that you believe that the company’s new product line will cause much higher growth in the near future. Your new estimate is for a three-year period of 20% annual growth to be followed by a return to the historical 8% growth rate.  Using these new assumptions, what is the value of the stock using the two-stage dividend growth model?

 

 

  1. An All-Pro defensive lineman is in contract negotiations. The team has offered the following salary structure: All salaries are to be paid in a lump sum.

 

YearSalary
0$5,000,000
1$4,000,000
2$4,800,000
3$5,600,000
4$6,200,000
5$6,800,000
6$7,300,000

The player has asked you as his agent to renegotiate the terms. He wants an $8 million signing bonus payable today and a contract value increase of $ 1,500,000. He also wants an equal salary every three months (each quarter), with the first paycheck three months from now. If the annual interest rate is 8%, what is the amount of his quarterly check? Use EXCEL for the work. (17 points)

 

 

  1. Portfolio Management

 

The table below shows the historical prices for Stock A and Stock B. You are managing a simple portfolio consist of these two stocks. Please find out the proper weights you should assign to these two stocks. Under such weights, your portfolio should yield a minimized coefficient of variation.

 

Step1, Calculate the annual returns for the two stocks

Step2, Set equal weights for two stocks and calculate the portfolio returns, standard deviation, and coefficient of variation

Step 3, Use the “Solver” function and change the weights to optimum

 

 

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