1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
lys-0071 [83]
2 years ago
14

7. Valuing semiannual coupon bonds Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual paymen

ts, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly. Assume that a $1,000,000 par value, semiannual coupon US Treasury note with five years to maturity has a coupon rate of 6%. The yield to maturity (YTM) of the bond is 9.90%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note: $849,059.88 $721,700.90 $534,907.72 $1,018,871.86 Based on your calculations and understanding of semiannual coupon bonds, complete the following statement: The T-note described in this problem is selling at a .
Business
1 answer:
Art [367]2 years ago
7 0

The value of the Treasury note is $849,059.88 and this is selling at a discount.

The value of a treasury note depends on different factors such as:

  • The initial value
  • The coupon rate
  • The value of the yield to maturity

Considering these aspects, let's calculate the value of the treasury note

Initial value: $1,000,000

$1,000,000 x 6% (coupon rate) =  $60,000

$60,000 / 2 (the coupon pays twice a year) = $30,000 - This value refers to the payment per period

Let's consider now the number of periods and the yield to maturity

Number of periods: 5 x 2 (the number of periods double) = 10 periods

Yield to maturity or rate: 9.90% / 2 (cash flow decreases by half) = 4.95%

Finally, you can use the PV formula to calculate the value:

PV (4.95%,10,-30000,-1000000) - This part is done in excel program as the original formula is quite complex

PV =$849,059.88

Based on this, the value of the note is $849,059.88, and you can conclude this is selling at a discount because this value is lower than the initial value of 1,000,000.

Learn more in: brainly.com/question/12881737

You might be interested in
During the past year, a firm produces 250 tablet devices at an average variable cost of $40 and at an average fixed cost of $10.
Bumek [7]

The total costs = Total variable costs + Total fixed costs

Given,

Average variable costs = $ 40

Average fixed cost = $ 10

Tablets produced during the year = 250

Total variable cost = Average variable costs × Tablets produced during the year

Total variable cost = 250 tablets × $ 40 = 10,000

Total fixed cost = Average fixed costs × Tablets produced during the year

Total fixed cost = 250 tablets × $ 10 = $ 2,500

Total costs = Total variable cost + Total fixed cost

Total costs = $ 10,000 + $ 2,500 = $ 12,500

6 0
3 years ago
Which term can be defined as the net income that a firm reinvests in itself?
KengaRu [80]

Answer:

retention ratio

Explanation:

Retention ration is the portion of net income retained by a firm to grow its business rather than being declared and paid as dividened.

When a company makes profit at the end of financial period, the company can either retain part of its earning for business expansion, declare part as dividends paid to shareholder or combine both.

Where a firm now reinvest the portion of the profit earned in itself, it is called retention ratio.

6 0
2 years ago
The grant available to third-or fourth-year college students majoring in
Marrrta [24]

<u>The grant available to third-or fourth-year college student:</u>

The National Science & Mathematics Access to Retain Talent Grant (National SMART Grant) is the grant given to the third or fourth year college students who want to do major in scientific or mathematical fields like physical, life, engineering, mathematics, medical, languages, etc.

To apply for the SMART grant students apply through free application of federal student aid and then if they receive the grant they can do their higher studies in their preferable fields which come under SMART grant.

5 0
3 years ago
Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60
kifflom [539]

Answer:

$57500 to Zheng and $ 47500 to Murray  

Explanation:

   

Allocation of Net income            Zheng            Murray            Total

                                           

Total Net income                                                                    105000

Less: Salary allowance                60000         40000    -100000  

Remaining income                                                              5000

Less: Interest on capital 10%         10000              20000    - 30000

Remaining Loss                                                                      -25000

Share equally                          -12500           -12500        25000

Share of partners                   57500                47500           0

8 0
3 years ago
Country b has a gdp of $1 trillion and a gdp per capita of $27,000. its economy is a mix of manufacturing, high tech, services,
liberstina [14]

Based on the descriptions of the economy, the type of economy that country b has is a developed economy.

<h3>What is a developed economy?</h3>

A developed economy is an economy characterised by high GDP, high rate of GDP per capita, high level of technological advancement and favorable laws that encourages the development of businesses.

Examples of developed economies are United States, Switzerland.

To learn more about developed economies, please check: brainly.com/question/19496739

#SPJ4

3 0
1 year ago
Other questions:
  • In the context of a SWOT analysis, which of the following would be considered a weakness for an organization?
    6·1 answer
  • Management innovations such as total quality, benchmarking, and business process reengineering cannot lead to sustainable compet
    8·2 answers
  • If the maximum operating capacity of the Gobblecakes bakery is 12,000 cupcakes annu- ally, determine the break-even volume as a
    15·1 answer
  • If sales are $400,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage
    6·1 answer
  • Today, music in the western world focuses on the pentatonic and whole-tone scales.
    8·1 answer
  • Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 10% and a standard de
    7·1 answer
  • People are living paycheck to paycheck why is that a problem
    12·1 answer
  • While a business plan is a detailed document with many sections, its overall purpose is to describe the nature of the business,
    14·1 answer
  • Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders' equity section of
    15·1 answer
  • Recommend further strategies companies woolworths in south africa may use to protect the environment
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!