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irina1246 [14]
3 years ago
15

King Noodles' bonds have a 7.5% coupon rate. Interest is paid quarterly and the bonds mature in 8 years. If the discount rate is

8%, what is the price of King Noodles' bonds?
Business
1 answer:
natima [27]3 years ago
3 0

Answer:

The price of King Noodles' bonds is $970.66

Explanation:

Coupon payment = 1000 x 7.5% = $75 per year = 75/4 = 18.75 per quarter

Number of periods = n = 8 years x 4 quarter each year = 32 quarter

Yield to maturity = 8% per year = 8% / 4 = 2% per quarter

Price of bond is the present value of future cash flows, to calculate Price of the bond use following formula:

Price of the Bond = $18.75 x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]

Price of the Bond =$18.75 x [ ( 1 - ( 1 + 2% )^-32 ) / 2% ] + [ $1,000 / ( 1 + 2% )^32 ]

Price of the Bond = $18.75 x [ ( 1 - ( 1.02 )^-32 ) / 0.02 ] + [ $1,000 / ( 1.02 )^32 ]

Price of the Bond = $440.03 + $530.63

Price of the Bond = $970.66

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On September 1, 2018, Able Company purchased a building from Regal Corporation by paying $580,000 cash and issuing a one-year no
Nataly_w [17]

Answer:

1. Able must pay Regal Corporation $599,400 on September 1, 2019, when the note matures.

2. The amount of Interest Able will recognize on this Notes Payable is 39,600

3. The total cash (including interest) paid for the building purchased by Able is $1,179,400

4. Payroll related expense does not come into picture in this question. So it is not answered.

Explanation:

1. According to the given data we have the following:

Rate of Interest = 11%

Therefore:      

Year                      Amount Interest      

September 1, 2018       $540,000      

December 31, 2018            $19,800      

September 1, 2019                     $39,600      

Total                      $540,000     $59,400

Therefore, Total Payable=Notes payable+Interest 540000      Total Payable= $540,000+$59,400

Total Payable=$599,400

Able must pay Regal Corporation $599,400 on September 1, 2019, when the note matures.

2. The amount of Interest Able will recognize on this Notes Payable is 39,600

3. To calculate The total cash paid for building purchased by Able including interest we have to make the following calculation:

Total cash paid for purchase of building=Cash paid at the time of purchase of building+Notes payable+Interest

Total cash paid for purchase of building=$580,000+$540,000+$59,400

Total cash paid for purchase of building=$1,179,400

The total cash (including interest) paid for the building purchased by Able is $1,179,400

4. Payroll related expense does not come into picture in this question. So it is not answered.

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Answer:

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Explanation:

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A proprietorship has three important advantages: (1) It is easily and inexpensively formed, (2) it is subject to government regu
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Answer:

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<em>However, a proprietorship also has three important limitations: </em>

(1) A proprietor has personal liability for the business' debts.

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(3) A proprietorship has difficulty obtaining large sums of capital so proprietorships are used primarily for small businesses.

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Max, an employee at HiFi LLC, is responsible for performing the job analysis process in her organization. She is currently plann
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Answer:

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