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Firm H will issue a Zero Coupon Bond. A 2% Rate. applies to each of the following:
1. Firm H will issue a Zero Coupon Bond. A 2% Rate.. applies to each of the following: Real Risk Free Rate of Return, Inflation Risk Premium, Liquidity Risk Premium, Maturity Risk Premium, and Default Risk Premium. Please compute the Bond Price for a 2 year Bond on a Semi-Annual basis.
2. For the scenario above, please confirm your Bond Price by confirming the Yield To Maturity.
3. For the scenario above, please confirm your Bond Price by first determining a Future Value, then determining the Present Value of the Future Value.
4. Assume that Firm L has a Debt To Equity Ratio of 50%. The Firm's Income Tax Rate is 40% and the Business Risk portion of the firm's Beta is .60. The DJIA is projected to yield a 14% Rate of Return .... The Risk Free Rate is 2%. Given this scenario , what is the % Required Rate of Return that the firm would use for investments.
5. For Firm L above, if an investment is expected to yield a 12% .. Return, should the investment be pursued ? Why or why not ?
