二章金融工具投资学答案bkmsol ch02.pdfVIP

CHAPTER2:FINANCIALINSTRUMENTS

1.(d)

2.(b)[6.75%/(1−0.34)=10.2%]

3.(a)Writingacallentailsunlimitedpotentiallossesas

thestockpricerises.

4.a.Youwouldhavetopaytheaskedpriceof:

112:05=112.15625%ofpar=$1,121.5625

b.Thecouponrateis5.625%implyingcouponpaymentsof$56.25annuallyor,

moreprecisely,$28.125semiannually.

c.Currentyield=(Annualcouponome/price)

=$56.25/$1,121.5625=0.0502=5.02%

5.Preferredstockislikelong-termdebtinthatit

typicallypromisesafixedpaymenteachyear.Inthis

way,itisaperpetuity.Preferredstockisalsolike

long-termdebtinthatitdoesnotgivetheholdervoting

rightsinthefirm.

Preferredstockislikeequityinthatthefirmisundernocontractualobligationto

makethepreferredstockdividendpayments.Failuretomakepaymentsdoesnotset

offcorporatebankruptcy.Withrespecttothepriorityofclaimstotheassetsofthe

firmintheeventofcorporatebankruptcy,preferredstockhasahigherprioritythan

commonequitybutalowerprioritythanbonds.

6.Moneymarketsecuritiesarecalled“cashequivalents”becauseoftheirgreatliquidity.

Thepricesofmoneymarketsecuritiesareverystable,andtheycanbeconvertedto

cash(i.e.,sold)onveryshortnoticeandwithverylowtransactioncosts.

7.P=$10,000/1.02=$9,803.92

8.Thetotalbefore-taxomeis$4.Afterthe70%

exclusionforpreferredstockdividends,thetaxable

omeis:0.30$4=$1.20

2-

Therefore,taxesare:0.30$1.20=$0.36

After-taxomeis:$4.00–$0.36=$3.64

Rateofreturnis:$3.64/$40.00=9.1%