ASSIGNMENT 2- 60 MARKS

1. 1. (a) Define interest rate and explain the different types of interest rate. 15 Marks

(b) Calculate the price of an AA-rated, 20-year, 8% coupon (paid annually) corporate bond (par value = $1,000) which is expected to earn a yield to maturity of 10%. 10 Marks

1. 2. (a) What is a bond? 5 Marks

(b) What are the four main types of bonds? 8 Marks

(c) Agnes wants to purchase common stock of New Frontier Inc. and hold it for 4 years. The directors of the company just announced that they expect to pay an annual cash dividend of $4.00 per share for the next 5 years. Agnes believes that she will be able to sell the stock for $40 at the end of 4 years. In order to earn 12% on this investment, how much should Agnes pay for this stock? 10 Marks

1. 3. Use the information below to answer the following questions about the Canary Cruises Corporation.

The Canary Cruises Corporation Income Statement Accounts for the year ending December 31, 2017

Account	Balance
Cost of goods sold	$345,000
Interest expense	$79,000
Taxes	$57,100
Revenue	$836,000
Selling, general, and administrative expenses	$93,000
Depreciation	$126,000

1. a) Refer to the Canary Cruises Corporation Income Statement Accounts. What is the net income for the Canary Cruises Corporation for 2017? 4 Marks

1. b) Refer to the Canary Cruises Corporation Corporation Income Statement Accounts. What is the operating cash flow for the Canary Cruises Corporation for 2017? 4 Marks

1. c) Refer to the Canary Cruises Corporation Corporation Income Statement Accounts. What is the EBIT for the Canary Cruises Corporation for 2017? 4 Markks