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3. Black Sheep Corporations balance sheet as of today is as follows: Long-term debt (bonds, at par) $10,000,000 Preferred st
MBAP505: Foundations of Quantitative Methods Homework V Due is 11:59 PM (CST), Tuesday, November 5, 2019 Name: T (60 POINTS).
C. Compute geometric mean return for Equity Fund. D. Compute Sample standard deviations of Equity Fund and Bond Fund. 2 I MBA
E. Compute Sample coefficients of variations of Equity Fund and Bond Fund. Which Funds do you prefer? Why? F. Compute a corre
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Answer #1

Answer to Question 3:

Par Value of Bonds = $10,000,000

Annual Coupon Rate = 4.00%
Semiannual Coupon Rate = 2.00%
Semiannual Coupon = 2.00% * $10,000,000
Semiannual Coupon = $200,000

Annual YTM = 12.00%
Semiannual YTM = 6.00%

Time to Maturity = 10 years
Semiannual Period = 20

Market Value of Bonds = $200,000 * PVIFA(6.00%, 20) + $10,000,000 * PVIF(6.00%, 20)
Market Value of Bonds = $200,000 * (1 - (1/1.06)^20) / 0.06 + $10,000,000 / 1.06^20
Market Value of Bonds = $200,000 * 11.469921 + $10,000,000 * 0.311805
Market Value of Bonds = $5,412,034.20

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