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8090 [49]
3 years ago
15

The yield to maturity on a discount bond is: equal to both the coupon rate and the current yield. equal to the current yield but

greater than the coupon rate. greater than both the current yield and the coupon rate. less than the current yield but greater than the coupon rate. less than both the current yield and the coupon rate.
Business
1 answer:
dlinn [17]3 years ago
8 0

Answer:

greater than both the current yield and the coupon rate.

Explanation:

A discount bond is a bond that at the point of issuance, it's less than its face or par value.

When a bond is trading for less than its face value in the market, it's known as a discount bond.

The yield to maturity on a discount bond is greater than both the current yield and the coupon rate. This simply means that the coupon rate is usually lower than the yield to maturity of the discount bond.

Additionally, the yield to maturity can be defined as the bond's total rate of return required by the secondary market while the coupon rate is defined as the annual interest of a bond divided by its face value.

For instance, when a bond is issued at a par or face value of $5,000, at maturity the investor would be paid $5,000. But because bonds are being sold before its maturity, it would trade below its face value.

Hence, a bond with the face value of $5,000 could trade for as low as $4,800, thus making it a discount bond.

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You buy a seven-year bond that has a 5.25% current yield and a 5.25% coupon (paid annually). In one year, promised yields to mat
Rufina [12.5K]

Answer:

HPR = 0.371%

Explanation:

we must first determine the price of the bond in 1 year:

present value of face value = $1,000 / (1 + 6.25%)⁶ = $695.07

present value of coupon payments = $52.50 x 4.87894 (PV annuity factor, 6.25%, 6 periods) = $256.14

market price in 1 year = $951.21

since you bought the bond at face value (market value = YTM), the the holding period return is:

HPR = [(ending price - actual price) + dividends received] / actual price

HPR = [($951.21 - $1,000) + $52.50] / $1,000 = $3.71 / $1,000 = 0.371%

5 0
3 years ago
Many commodities have futures markets associated with them. A futures market is a prediction market that aggregates information
arlik [135]

Answer:

Answer is explained in the explanation section below.

Explanation:

Solution:

a.

Unleaded fuel prices are expected to fall by June 2019 according to future demand forecasts.

Since the future price is less than the spot price, it would be better for long-term buyers who can wait for the price to increase because the market is currently in BACKWARDATION. This happens due to a short-term disparity in demand and supply.

b.

If the information in this sector is reliable and impartial, the expected June price will most likely be similar to the real price we will see in June.

It is reliable if the market is accurate and impartial, i.e. the market research on which knowledge flows.

The prices of goods are either integrated or expressed in such a flow of knowledge.

So, if it's unbiased and reliable, the forecast prices would be reasonably similar to the real future price.

5 0
3 years ago
At a price $4 for good x, a firm is willing to supply 1,400 units of x. for a price of $5 for good x, the firm is willing to sup
KIM [24]
100 unit difference
7 0
3 years ago
Your boss is considering a 5-year investment project. If the project is accepted, it would require an immediate spending of $678
marusya05 [52]

Answer:

$50.47

Explanation:

Net present value is the present value of after-tax cash flows from an investment less the amount invested.  

NPV can be calculated using a financial calculator  

Cash flow in year 0 = - ($678 +  $58 ) = -736

Cash flow in year 1 - 4 = $173

Cash flow in year 5 = $173 + $144

I = 8.1

NPV = 50.47

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

7 0
3 years ago
The commission structure on a stock purchase is $45 plus $0.04 per share. If you purchase five round lots of a stock selling for
Vedmedyk [2.9K]

The commission for purchasing five round lots of a stock selling for $130 is $65.

<h3>What is round lots of a stock?</h3>

A specified quantity of securities to be traded on an exchange is known as a round lot. In the stock market, a round lot is defined as 100 shares or a bigger number that may be divided in half equally.

1 round lots = 100 shares

5 round lots = 500 shares

The commission structure on a stock purchase is $45 plus $0.04 per share.

For 500 shares, the commission is

= 45 + 0.04×500

= 65

Therefore, the commission for purchasing 500 shares of stock selling for $130 is $65.

To know more about commission, here

brainly.com/question/957886

#SPJ4

7 0
1 year ago
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