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SOVA2 [1]
3 years ago
8

One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000. Today,

the market interest rate on these bonds is 5.5%.
What is the current price of the bonds, given that they now have 14 years to maturity?

a) $1,077.01 b) $1,104.62 c) $1,132.95 d) $1,162.00 e) $1,191.79
Business
1 answer:
denis-greek [22]3 years ago
4 0

Answer:

e) $1,191.79

Explanation:

In order to find the price of a bond we need to know the future value of the bond, the interest rate on the bonds, the coupon payments and the time to maturity. In this case the future value of the bond is 1,000, the interest rate is 5.5%, the time to maturity is 14 years and the coupon payments are 7.5% which are (0.075*1,000)=75. Now we input all these values in a financial calculator and compute the present value/price.

FV= 1,000

I=5.5

N=14

PMT= 75

Compute PV=1,191

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Pharoah, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 11.0 percent (semiannual payments). Mana
Delvig [45]

Answer:

Pharaoh will have to pay $1,084.47 for every outstanding bond that it retires.

Explanation:

if the market rate is 9.5%, then the price of outstanding bonds is:

PV of face value = $1,000 / (1 + 4.75%)¹⁴ = $522.21

PV of coupon payments = $55 x 10.22283 (PV annuity factor, 4.5%, 14 periods) = $562.26

market price = $1,084.47

3 0
3 years ago
Company Z is a U.S. company that is the first in this country to produce a good that is already produced in many foreign countri
lina2011 [118]

Answer:

Infant industry.

Explanation:

In this scenario, Company Z is a U.S. company that is the first in this country to produce a good that is already produced in many foreign countries and sold in the United States. Most likely, the argument it will voice in its attempt to be protected from foreign competition is the infant industry argument.

An infant industry can be defined as an industry that is still in its early stages of development and as such are not capable of competing with foreign companies.

<em>Hence, according to the infant industry theory the argument would be that infant industries should be offered some kind of protection from competitors in other industries either foreign or local until they mature and develop a good and reputable economies of scale. </em>

6 0
3 years ago
The limited liability of a stockholder in a closely-held corporation may be challenged successfully if the stockholdera. Underca
lina2011 [118]

Answer:

The correct Option is A

Explanation:

When the limited liability of the stockholder and it is a closely held corporation which might be challenged successfully if the stockholder, undercapitalized the corporation  which means that the corporation does not have enough capital to pay creditors and conduct normal operations of the business and it will be done when it is established or formed.

5 0
3 years ago
Wholemark is an Internet order business that sells one popular New Year greeting card once a year. The cost of the paper on whic
Orlov [11]

Answer:

9644

Explanation:

cost of paper on which a card is printed = $0.40 per card

cost of printing = $0.10 per card

profit made per card sold = $3.75

number of areas where customers are located (n)= 4

mean of customers from each region = 2300

standard deviation for each region = 200

note : each region is independent

The optimal production quantity for the card can be calculated going through these steps

first we determine

the cost of card = $0.10 + $0.40 = $0.50

selling value = $3.75

salvage value = 0

next we calculate for the z value

= ( selling value - cost of card) /  ( selling price - salvage value )

= ( 3.75 - 0.50 ) / 3.75  = 0.8667

Z( 0.8667 ) = 1.110926 ( using excel formula : NORMSINV ( 0.8667 )

next we calculate

<em>u</em> = n * mean demand

  = 4 *  2300 = 9200

б = 200\sqrt{n} = 200 * 2

  = 400

Hence optimal production quantity for the card

= <em>u</em> + Z (0.8667 ) * б

= 9200 + 1.110926 * 400

= 9644.3704

≈ 9644

3 0
3 years ago
M1 is the
Elodia [21]

Answer:

B. money market funds

Explanation:

The most limited definition of money, M1, consists just of cash and various bank accounts that allow check writing. Money in circulation includes cash, traveler's checks, demand deposits, and other types of checkable deposits.

7 0
2 years ago
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