DVU Asset Ratios Equivalent Yield and Prices Questions

Description

1. Examine the balance sheet of commercial banks in Table 1.3. a. What is the ratio of real assets to total assets? b. What is that ratio for nonfinancial firms? (Table 1.4)(Round your answer to 4 decimal places.)

2. A municipal bond carries a coupon rate of 5.75% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 40% combined tax bracket? (Round your answer to 2 decimal places.)

3. A municipal bond carries a coupon rate of 5.75% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 40% combined tax bracket? (Round your answer to 2 decimal places.)

4. Which security should sell at a greater price?

a. An 8-year Treasury bond with a 11.00% coupon rate or an 8-year Treasury bond with a 10.00% coupon.

An 8-year Treasury bond with a 11% coupon rate
An 8-year Treasury bond with a 10% coupon

b. A four-month expiration call option with an exercise price of $39 or a four-month call on the same stock with an exercise price of $44? A four-month call on the same stock with an exercise price of $44

A four-month expiration call option with an exercise price of $39

c. A put option on a stock selling at $64 or a put option on another stock selling at $54. (All other relevant features of the stocks and options are assumed to be identical.)

A put option on another stock selling at $54A put option on a stock selling at $64

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