In the theory of deregulation economics, cutting taxes allows people to save more money. Banks then loan that money to businesse
1 answer:
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Complete Question:
Suppose a five-year, $1000 bond with annual coupons has a price of $903.35 and a yield to maturity of 5.6%. What is the bond's coupon rate?
Answer:
3.396% Approximately
Explanation:
We can calculate the coupon interest by using the formula given in the attachment.
Now, here we have:
F is the Face value which is $1000
P is the price of the bond which in this case is $903.35
C is the Coupon interest
n are the number of years which is 5 years in this case
Yield to Maturity is 5.6%
By putting the values in the given equation we have:
5.6% = [C + ($1000 - $903.35)/5 years] / [($1000 + $903.35)/2]
5.6% = [C + 19.33] / [951.675]
0.056 * 951.675 = C + 19.33
53.2938 = C + 19.33
C = 53.2938 - 19.33
C = $33.96 approximate estimate.
Now we will find the coupon rate by using the following formula:
Coupon Rate = Coupon Interest / Face Value
By putting values, we have:
Coupon Rate = $33.96 / $1000 = 3.396% Approximately.
Accurate Coupon interest can be calculated using excel. The above answer gives minor difference in decimal points.
Answer: $40,000
Explanation:
Hello. Your question was incomplete as it lacked the balance sheet in question. Luckily I found it and have now attached it.
The question states that the central bank has set a required reserve ratio of 10%. This means that 10% of the deposits at the bank are not to be touched so they cannot loan past 90% of the deposits.
The bank has only $60,000 remaining to loan out as they will not sell their securities.
So we will calculate how much they can loan out thus,
= 60,000 - (200,000 * 10%) to find out what amount cannot be touched
= 60,000 - 20,000
= $40,000
The maximum amount of additional loans the bank in Jamestown can undertake is $40,000.
