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pentagon [3]
1 year ago
14

A 5-year bond with a 10% coupon rate was purchased at $980 at issue and sold at $1020 by end of year 4. What is the investor's y

early rate of return? How does it compare to coupon rate and YTM?
Use a financial calculator and Excel to solve it
Business
1 answer:
Dimas [21]1 year ago
6 0

The yearly return of the investor is given to be 11.069%

<h3>How to find the YTM</h3>

In order to do this we have to make use of the Rate function in excel

This would be given as

=RATE(nper, PMT, PV, FV)

where Nper is 5 years

PMT is = $1,000*10% = $100

PV = $980

The future value Fv is given as $1,000

Hnece we would have to type in excel

RATE(5,100,-980,1000)

This would give us the value of the YTM as 10.5348%

Next would be to find the rate of return of this investor. This would be the rate that he actually earned.

We would also use the rate function

=RATE(nper, PMT, PV, FV

Npe = 4 years

PMT = $1,000*10% = $100

PV = $980

FV = $1,020 that is the amount for which the bond was sold

=RATE(4,100,-980,1020)

The solution would be = 11.0698%

Thus we can say that the return earned on investment is 11.0698%

Read more on YTM here

brainly.com/question/26376004

#SPJ1

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The Herfindahl index equals ______. Multiple choice question. total market shares of the largest four firms in an industry sum o
Lelu [443]

The Herfindahl index equals sum of the squared percentage market shares of all firms in an industry.

<h3>What is Herfindahl index?</h3>

The Herfindahl Index can be regarded as the common measure of market concentration which is used in measuring the market in term of the competition.

In calculating this  Herfindahl Index, we can determine the pre- and post-M&A and  equals sum of the squared percentage market shares .

Learn more about  Herfindahl index at; brainly.com/question/15701307

#SPJ1

8 0
1 year ago
When can interest be included in the acquisition cost of a plant asset?
hammer [34]

Answer:

a. during the the construction period of a self-constructed asset

Explanation:

"Determining the cost of constructing a new building is often more difficult. Usually this cost includes architect’s fees; building permits; payments to contractors; and the cost of digging the foundation. Also included are labor and materials to build the building; salaries of officers supervising the construction; and insurance, taxes, and interest during the construction period."

Reference: Porter, Debbie, and Tidewater Community College. “Principles of Accounting I.” Lumen, 2019,

7 0
3 years ago
The market capitalization treasure on the stock of flex steel company is 12%. the expected ROE is 13% and the expected EPS are 3
VLD [36.1K]

Answer:

a. ROE (r) = 13% = 0.13

EPS = $3.60

Expected dividend (D1) = 50% x $3.60 = $1.80

Plowback ratio (b) = 50% = 0.50

Cost of equity (ke) = 12% = 0.12

Growth rate = r x b

Growth rate = 0.13 x 0.50 = 0.065

Po= D1/Ke-g

Po = $1.80/0.12-0.065

Po = $1.80/0.055

Po = $32.73

P/E ratio = <u>Current market price per share</u>

                  Earnings per share

P/E ratio = <u>$32.73</u>

                 $3.60

P/E ratio = 9.09        

b.  ER(S) = Rf + β(Rm - Rf)

    ER(S) = 5 + 1.2(13 - 5)

    ER(S) = 5 + 9.6

    ER(S) = 14.6%

                                                                                                                                                                                                                                                                                                                                                                                     

Explanation:

In the first part of the question, there is need to calculate the expected dividend, which is dividend pay-our ratio of 50% multiplied by earnings per share. We also need to calculate the growth rate, which is plowback ratio multiplied by ROE. Then, we will calculate the current market price, which equals expected dividend divided by the difference between return on stock (Ke) and growth rate. Finally, the price-earnings ratio is calculated as current market price per share divided by earnings per share.

In the second part of the question, Cost of equity (return on stock) is a function of risk-free rate plus beta multiplied by market risk-premium. Market risk premium is market return minus risk-free rate.

8 0
3 years ago
Equity Method for Stock Investment On January 4, Year 1, Ferguson Company purchased 108,000 shares of Silva Company directly fro
r-ruslan [8.4K]

Answer:

a)

January 4, year 1, investment in Silva Company (36% of outstanding stocks)

Dr Investment in Silva Company 5,184,000

    Cr Cash 5,184,000

July 2, year 1, distributed dividends ( $292,000 x 36%)

Dr Cash 104,400

    Cr Investment in Silva Company 104,400

December 31, year 1, net income reported by Silva Company ($971,000 x 36%)

Dr Investment in Silva Company 349,560

    Cr Revenue from investment in Silva Company 349,560

b)

Balance of Investment in Silva Company = $5,184,000 - $104,400 + $349,560 = $5,429,160

Explanation:

Since Ferguson exercises significant influence over Silva Company, they must record the investment using the equity method.

7 0
3 years ago
A delivery company purchased a bunch of new trucks three years ago for $6 million. These trucks can be sold today for $5.3 milli
mafiozo [28]

Answer:

The net book value  of the company = $3,415,000

Explanation:

<em>The historical cost concept states that assets should be stated at their historical cost. Under this concept, the value of a company is the the net-book value of its assets. The net book value of an asset is its historical cost less the accumulated depreciation to date.</em>

The book value of the delivery company

Net fixed assets                          $3, 200,000

Net working capital                   <u> $215,000</u>

Total book value                       <u> $3,415,000</u>

The net book value  of the company = $3,415,000

4 0
2 years ago
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