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steposvetlana [31]
3 years ago
13

RJR Nabisco recently experienced a market reevaluation due to a number of tobacco lawsuits. The firm has a bond outstanding with

15 years to maturity, and a coupon rate of 8%, with interest being paid semiannually. The required yield to maturity has risen to 16%. What is the price of the RJR Nabisco bond?
Business
1 answer:
vova2212 [387]3 years ago
6 0

Answer: The current price of the bond is $258.74

Explanation:

The present value of the bond is its Current Price

We would use the following formua to calculate the Current Price of the bond,

PV = \frac{FV}{(1+r)^{N} } + A [\frac{1-\frac{1}{(1+r)^{N} } }{r} ]

Where,

FV = Face value =  $1,000

A = Coupon payment paid semi annually = (8% x 1000) / 2 = $40

r = Yield to Maturity = 16%

N = Number of periods = 15 years x 2 = 30 semi-annual periods

PV = \frac{1000}{(1+0.16)^{30} } + 40 [\frac{1-\frac{1}{(1+0.16)^{30} } }{0.16} ]

PV = 258.73618

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2 years ago
You made an error when you filed your tax return last year. You can correct this error by filing Form________
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Answer:

1040X

Explanation:

Form 1040X should be filled to make any amendments in the returns filed incorrectly. It is similar to Form 1040 with additional columns. It has additional columns, first column (A) where incorrect value is put, net change is put in the second column (B) and in the final column (C), correct amount is put. After recalculation, if a taxpayer owes additional tax, then 1040X should be filed by the due date. In case of refunds, 1040X can be filed within 3 years after the original returns were filed or 2 years from original tax paid.

4 0
4 years ago
What is the marginal income tax rate of a $5,000 raise for someone who currently makes $95,000 per year?
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4 years ago
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Nadya [2.5K]

Answer:

Solution for question 1

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Hence, given statement is true.

Solution for question 4

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