The bond has a face value of $10000, 10-year maturity and a fixedrate annual coupon of 10 percent. The certificate of deposit has a oneyear maturity and a 6 percent fixed rate of interest. MNK expects no additional asset growth. If market interest rates had decreased 200 basis points by the end of year one, what would be the market value of equity assuming that Cash and Certificate of deposit remain at the same value?

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MNK corporation has the following market value balance sheet structure: Assets Liabilities and equity Cash Bond Total assets $1 000 $10 000 $11 000 Certificate of deposit Equity Total liabilities and equity $10 000 $1 000 $11 000 MNK corporation has the following market value balance sheet structure: Assets Liabilities and equity Cash Bond Total assets $1 000 $10 000 $11 000 Certificate of deposit Equity Total liabilities and equity $10 000 $1 000 $11 000

Answer rating: 100% (QA)

To calculate the market value of equity we need to determine the impact of the decrease in marke... View the full answer