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Arada [10]
3 years ago
5

A 13-year bond of a firm in severe financial distress has a coupon rate of 10% and sells for $930. The firm is currently renegot

iating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. What are the stated and expected yields to maturity of the bonds? The bond makes its coupon payments annually.
Business
1 answer:
adoni [48]3 years ago
3 0

Answer:

Stated yield is 11.04%

expected yield is  5.78%

Explanation:

The expected yield to maturity can be computed using the rate formula in excel which is given below:

=rate(nper,pmt,-pv,fv)

nper is the number of coupon interest the bond would pay which is 13

pmt is the amount of coupon interest the bond pays which is $1000*10%=$100

pv is the current price of the bond which is $930

fv is the face value of $1000

=rate(13,100,-930,1000)=11.04%

However the expected yield has the coupon interest reduced to one -half as calculated below:

=rate(13,100*0.5,-930,1000)=5.78%

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First start by removing the initial debt from the initial basis so as not to inflate the basis.

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The Ending basis is therefore,

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4 0
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) A company determines that its marginal revenue per day is given by R'(t) = 100et , R(0) = 0, where R(t) = the revenue, in doll
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Answer:

The answer is below

Explanation:

The marginal revenue R'(t) = 100e^t and the marginal cost C'(t) = 140 - 0.3t.

The total profit is the difference between the total revenue and total cost of a product, it is given by:

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P(T) = R(T) - C(T)

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Hence the total profit from 0 to 5 days is given as

P(T) = \int\limits^0_5 {(R'(T)-C'(T))} \, dt= \int\limits^0_5 {(100e^t-(140-0.3t))} \, dt\\ \\P(T)= \int\limits^0_5 {(100e^t-140+0.3t))} \, dt\\\\P(T)= \int\limits^0_5 {100e^t} \, dt- \int\limits^0_5 {140} \, dt+ \int\limits^0_5 {0.3t} \, dt\\\\P(T)=100\int\limits^0_5 {e^t} \, dt- 140\int\limits^0_5 {1} \, dt+0.3 \int\limits^0_5 {t} \, dt\\\\P(T)=100[e^t]_0^5-140[t]_0^5+0.3[\frac{t^2}{2} ]_0^5\\\\P(T)=100(147.41)-140(5)+0.3(12.5)=14741-700+3.75\\\\P(T)=14045

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