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KATRIN_1 [288]
4 years ago
6

g Jordan Enterprises plans to issue $120,000,000 of 20-year semi-annual bonds in September to help finance a new factory. It is

January, and the current cost of debt to the company is 9 percent. However, the firm’s financial manager is concerned that interest rates will climb by 1.5 percent in a current high inflation environment. a) What would be the outcome if interest rates climb by 1.5 percent and Jordan did not hedge its position? b) If Jordan hedges the bond issue, it will use the Treasury bond ($100,000) futures contracts that are currently trading at 129-2. What would be the outcome if Jordan hedges its position and interest rates climb by 1.5 percent on the Treasury bond as well?
Business
1 answer:
Elanso [62]4 years ago
8 0

Answer:

(a)  $900,000  semi annually

(b) $706,200

Explanation:

a).Total Period to issue 20 year semi-annual bonds=20×2=40

The Cost Of Debt to Company is Increase by = Value Of Bonds × Interest Rate × Semi Annual Year

= $120,000,000 × 1.5% × 1/2

= $900,000  semi annually

b). Consider face value of treasury bond is = $100  

Future contract that are currently trading at 129.2, its means yield to maturity is less than coupon rate, according to this we can say that Required rate of return is less than coupon rate.

According to this if interest rate increase by 1.5%, bond price will be increase by 1.5%  

Bond Traded at = $129.2 × 1.5% + $129.2

= 1.938 + 129.2

= $131.138

Jordon Earn From Future = Future Contract × (Bond Traded - Currently Trading)

= $100,000 × ( $131.138 - $129.2)

= $193,800

If hedge, net outcome will be = $900,000 - $193,800

= $706,200

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Thepotemich [5.8K]

Answer:

PV= $3,150.85

Explanation:

Giving the following information:

Number of periods (n)= 6 yeras

Future value (FV)= $5,000

Interest rate (i)= 8%

<u>To calculate the present value, we need to use the following formula:</u>

FV= PV*(1+i)^n

Isolating PV:

PV= FV/(1+i)^n

PV= 5,000/(1.08^6)

PV= $3,150.85

3 0
3 years ago
Which of the following is a reason you should use courtesy while driving?
Ostrovityanka [42]
"Courtesy helps drivers interact on the road and keeps traffic flow moving", "When driving, you are always surrounded by other road users" and "Traffic laws require you to be courteous to other road users" are the reasons why you should use courtesy when driving. The correct option is the fourth option or option

8 0
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To address the widespread and growing concern of contaminated food causing serious injury and death to individuals throughout th
Verdich [7]

Answer:To put in place a corporate food safety compliance policy is the basic requirements for salvaging the consumers from poisoned food ,companies are required by total quality management to go beyond just avoid fines but to put the customer safety first and foremost of their business plan ,the BPP requires company to take the following steps inquiry,discussion,decision, justifications and evaluation.

Explanation:using the business process pragmatism methods the following steps will be taken

Inquiry:Trevor should make inquiry on what constitutes poisoning in food industry,this may require stakeholders meeting which must include expert quality control officers,industry experts,representative of the US food and drug administration,legal expert in the food industry etc,

Discussion :the forum will review the causeof food poisoning in the industry and how it affects the populace and how it can be checked or reduced or avoided.

Decision a decision acceptable to all stakeholders which has the best interest of the consumers should be reached with a clear plan of implementation , this should consider the legal aspect and at the same time the health of the population which it tends to make it's consumers .

Justifications:there should be enough justifications for any decision reached because the board and the shareholders are also stakeholders and need to be convinced as well that any decision taken will have their interest as well as the consumers at heart as well as protecting the brand .

Evaluation:this requires financial aspect and the other resources that may be required to be assess while the best workable should be adopted.

3 0
3 years ago
At the beginning of May, Golden Gopher Company reports a balance in Supplies of $380. On May 15, Golden Gopher purchases an addi
shusha [124]

Answer:

Supplies  $180

Supplies expense  $2300

Explanation:

Changes between the opening and closing balance of the supplies account is as a  result of purchases and use of supplies. When supplies are purchased, it increases the account balance while the use of supplies reduces it.

Let the cost of supplies used during the period be y

$380 + $2100 - y = $180

y = $380 + $2100 - $180

y = $2300

The balance in the supplies account on May 31 after adjustment is $180 while that of the supplies expense account is $2300.

5 0
4 years ago
A clothing store asserts that 60% of its customers pay by credit. On a particular day, 35 customers purchased items at the store
Harlamova29_29 [7]

Based on the percentage of customers that pay by credit and the number of customers that purchased, the following are true:

  1. Mean = 21; Standard deviation = 2.8983
  2. 0.8508
  3. 0.0009
  4. 0.0009
  5. 0.9982

<h3>What are the standard deviation and mean?</h3>

Mean is:

= 35 x 60%

= 21

Standard deviation:

= √(35 x 0.6 x (1-0.6)

= 2.8983

<h3>What are the probabilities for the clothing store?</h3>

Probability that half of customers paid by credit:

First, find the z value to use the Standard Normal Cumulative Probability table:

= (18 - 21) / 2.8983

= -1.04

= 1 - P(z < -1.04)

= 1 - 0.1492

= 0.8508

Probability that 30 or more paid by credit:

= (30 - 21) / 2.8983

= 3.11

= 1 - P (z < 3.11)

= 1 - 0.9991

= 0.0009

Probability that less than 12 paid by credit:

= (12 - 21) / 2.8983

= -3.11

= P (z ≤ -3.11)

= 0.0009

Probability that 12 to 30 paid by credit:

= P (12 ≤ x ≤ 30)

= P (-3.11 ≤ z ≤ 3.11)

= 0.9991 - 0.0009

= 0.9982

Find out more on the Standard Normal Cumulative Probability distribution at brainly.com/question/7207785.

#SPJ1

4 0
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