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Alona [7]
3 years ago
7

Morgan would like to purchase a bond that has a par value of $1,000, pays $80 at the end of each year in coupon payments, and ha

s 10 years remaining until maturity. If the prevailing annualized yield on other bonds with similar characteristics is 6 percent, how much will Morgan pay for the bond
Business
1 answer:
dybincka [34]3 years ago
6 0

Answer:

Price of Bond =  $1,147.201

Explanation:

The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).  

Value of Bond = PV of interest + PV of RV  

The value of bond for Morgan can be worked out as follows:

Step 1  

<em>PV of interest payments  </em>

PV of interest =  

A × (1+r)^(-n)/r

A- interest payment- 80, r-yield on bond- 6%, n-years to maturity- 10

80 × (1- (1.06)^(-10)

= 588.8069

Step 2  

<em>PV of Redemption Value  </em>

= 1,000 × (1.06)^(-10)  

= 558.3947769

Price of bond  

=  588.80 + 558.394

Price of Bond =  $1,147.201

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Therefore, Investing activities is correct.

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8 0
2 years ago
An investment that costs $5,800 will produce annual cash flows of $2,480 for a period of 4 years. Given a desired rate of return
aleksandrvk [35]

Based on the present value of the annual cash flows and the investment cost, the present value index is 1.39

<h3>How is the present value index calculated?</h3>

To find the present value index, use the formula:

= Present value of cash flow/Investment cost

The present value of cash flow is:

= Annual cash flows x Present value interest factor of annuity, 9%, 4 years

= 2,480 x 3.239719877

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The present value index is:

= 8,034.51 / 5,800

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8 0
1 year ago
In 2002 Ortega's nominal income rose by 4.6 percent and the price level rose by 1.6 percent. We can conclude that Ortega's real
monitta

Answer:

c rose by 3 percent.

Explanation:

Real income is nominal income less price level changes.

Real income = nominal income - changes in price level

4.6 % - 1.6% = 3%

I hope my answer helps you

4 0
3 years ago
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kenny6666 [7]

The statement"There are many account representatives who can help you with your order is an example of a cliche." is FALSE.  This is further explained below.

<h3>What are account representatives?</h3>

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6 0
2 years ago
Theodosia was laid off from her last job. What should she put on her next application as her reason for leaving that job?
OleMash [197]

Answer:

O Downsizing

Explanation:

A lay off happens when the employer has closed down, has changed locations, or when there is not sufficient work for all the employees. A layoff is not caused by an employee's fault.

Downsizing refers to scaling down of operation. When a company downsizes, some of the employees will be laid off. Theodosia should mention she was laid off in her next application. The potential employer will realize that she wasn't at fault at her previous workplace.

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