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kobusy [5.1K]
3 years ago
11

On January 1, 2005, Systil Corporation issues $50M 10 year bonds with a coupon rate of 10%. Interest is payable annually at the

end of the year. If the required return on bonds of similar risk at January 1, 2006 is 8%, what will be the price of the bonds be at this date?
Business
1 answer:
Serga [27]3 years ago
4 0

Answer:

By January 1, 2006 the price of the bonds=$50.675 M

Explanation:

The price of a bond at any given time can be expressed as;

Current price=(Annual coupon×((1-(1/(1+r)^i)/r)+ (face value/(1+r)^i)

where;

i-maturity period, from 2005-2006=1 year

r-nominal yield to maturity rate=8%

coupon rate=10%

face value=$50 M

Annual coupon=(10/100)×50 M=5 M

replacing;

Current price=Annual coupon×((1-(1/(1+r)^i)/r  + face value/(1+r)^i

(5 M×((1-(1/(1+0.08)^1)/0.08)+50/(1+0.08)^1

(5 M×(1-0.93)/0.08)+46.3

(5×0.875)+46.3=4.375+46.3=50.675 M

By January 1, 2006 the price of the bonds=$50.675 M

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8 0
1 year ago
Firm b pays a constant $9.50 dividend on its stock and will maintain this dividend for the next 11 years and will then cease pay
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Firm b pays a constant dividend (D0) = $9.50

Number of years (N) = 11 years

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6 0
3 years ago
The skills, tools, and processes used to plan, execute, and control the elements of a project are a part of __________.
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Explanation:

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3 years ago
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Answer:

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Explanation:

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6 0
3 years ago
In a relatively new neighborhood with 345 homes, the median home price is $350,000. Last year, 58 houses were sold. The turnover
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Answer:

Turnover index = 17 % (Approx)

Explanation:

Given:

Total number of house = 345

Number of house sold = 58

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Turnover index = [Number of house sold/Total number of house]100

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Turnover index = 17 % (Approx)

7 0
3 years ago
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