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otez555 [7]
3 years ago
6

The Penn Railways has a 7-year, 6.5 percent semiannual coupon bond outstanding with a $1,000 par value. The bond has a yield to

maturity of 5.5 percent. What will happen to the bond price if the market yield suddenly increases to 7 percent?
Business
1 answer:
Nuetrik [128]3 years ago
3 0

Answer:

The increase in yield to maturity from 5.5% to 7% will cause the price of the bond to fall from $ 1,057.46  to $ 972.70  

Explanation:

In order to ascertain the impact on the bond of a sudden increase in the yield to maturity from 5.5% to 7%, the present value of the bond, the current price is computed using yield of maturity of 5.5% and 7% respectively.

In calculating the present value, a discounting factor is used to state today's value of the future cash flows from the bond, given as 1/(1+r)^N, where r is the yield to maturity divided by 2 , in order to show that the bond is a semi-annual  interest paying bond.The fact that the bond is a semiannual one means interest would be paid 14 times( 7 years *2)

The present value is computed in the attached.

Download xlsx
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3 years ago
Describe the difference between a fixed-quantity (Q) and a fixed-period (P) inventory systems and provide an example for each.
sergeinik [125]

Answer and Explanation:

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Question 1(Multiple Choice Worth 10 points)
san4es73 [151]

Answer:

Option A, Increased mental stress

Explanation:

Increased mental stress  is one of the possible effect of identity theft.

It can cause following negative impacts on the mental and physical health of an individual

a) It causes sleep disturbance

b) Physical symptoms such as aches and pains, heart palpitations, sweating and stomach issues arises

c) Post stress disorder

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8 0
3 years ago
A firm is evaluating a proposal which has an initial investment of $50,000 and has cash flows of $15,000 per year for five years
Harlamova29_29 [7]

Answer:

3 1/3 years

Explanation:

Payback period is the time required for the inflows from a project to be equal to the initial outflow for the project. It is a key consideration in capital budgeting. It is usually assumed that the outlay or initial outflow is made in year 0 and the first inflow comes in after a year.

Year       Cash outflow      Cash inflow           Balance

0                ($50,000)                   -                ($50,000)

1                         -                   $15,000           ($35,000)

2                        -                    $15,000          ($20,000)

3                        -                    $15,000           ($5,000)

4                      -                      $15,000           $10,000

5                       -                    $15,000            $25,000

Hence the payback period

= 3 years and 5000/15000 * 12 months

= 3 years 4 months

= 3 1/3 years

3 0
3 years ago
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