Debt: 5,000 7.2 percent coupon bonds outstanding, $1,000 par value, 30 years to maturity, selling for 108 percent of par; the bo
1 answer:
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x: 500, 700, 750, 590 , 540, 650, 480
y: 7.00, 7.50 , 9.00, 6.5, 7.50 , 7.0, 4.50
We want to create a linear model like this :
Where
And:
With these we can find the sums:
And the slope would be:
Now we can find the means for x and y like this:
And we can find the intercept using this:
And the line would be:
Part b
The correlation coefficient is given by:
For our case we have this:
The determination coefficient is given by:
Part c
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Answer:
The minimum would be the present value of the bonus, which is 5,075.72 dollars
Explanation:
we have to discount the 7,200 dollar bonus at 6% discount rate for 6 years to get the present value of the bonus:
Maturity 7,200
time 6 years
rate 6% = 6/100 = 0.06
PV $ 5,075.7159