Nike, Inc., with headquarters in Beaverton, Oregon, is one of the world’s leading manufacturers of athletic shoes and sports apparel. The following activities occurred during a recent year. The amounts are rounded to millions, except for par value. a. Purchased additional buildings for $303 and equipment for $1,202; paid $432 in cash and signed …
Jameson Corporation was organized on May 1. The following events occurred during the first month. a. Received $70,000 cash from the five investors who organized Jameson Corporation. Each investor received 100 shares of $10 par value common stock.b. Ordered store fixtures costing $15,000.c. Borrowed $18,000 cash and signed a note due in two years.d. Purchased …
The following events occurred for Johnson Company:a. Received investment of cash by organizers and distributed to them 1,000 shares of $1 par value common stock with a market price of $40 per share.b. Purchased $15,000 of equipment, paying $3,000 in cash and owing the rest on accounts payable to the manufacturer.c. Borrowed $10,000 cash from …
Discuss four ways that option pricing is used in corporate finance.
2.8 Suppose that the interest rate on a one-year Treasury bill is currently 1% and that investors expect that the interest rates on one-year Treasury bills over the next three years will be 2%, 3%, and 2%. Use the expectations theory to calculate the current interest rates on two-year, three-year, and four-year Treasury notes. …
2.6 Suppose that you want to invest for three years to earn the highest possible return. You have three options: (a) Roll over three one-year bonds, which pay interest rates of 8% in the first year, 11% in the second year, and 7% in the third year; (b) buy a two-year bond with a …
1.12 [Related to the Apply the Concept: “Do Credit Rating Agencies Have a Conflict of Interest?”] According to an article in the Wall Street Journal, “Investors are skeptical of some of the [bond] ratings. More than $100 billion worth of bonds trade with yields like junk despite their triple-B-minus ratings.” 1. What is a …
Do Credit Rating Agencies Have a Conflict of Interest? Read More »
1.10 According to an article in the Wall Street Journal in 2020, bonds issued by the satellite operator Intelsat that matured in 2023 “fell to a record low of 43 cents on the dollar.” Why would an investor sell one of these bonds for 43 cents on the dollar rather than hold the bond for …
1.6 Why might the bond rating agencies lower their ratings on a firm’s bonds? Draw a demand and supply graph for bonds that shows the effect on a bond that has its rating lowered. Be sure to show the demand and supply curves and the equilibrium price of the bond before and after …
4.3 Draw a graph of the money market. Show the effect on the money demand curve, the money supply curve, and the equilibrium short-term nominal interest rate of each of the following: 1. The Fed decreases the money supply. 2. A recession causes real GDP to fall. 3. The price level increases. 4. The Fed …
