An ad campaign by Suave shampoo asked television viewers to identify the heads of hair of women who used Suave shampoo and condi
1 answer:
You might be interested in
Answer:
total rate of return on the Bond = 9.40%
Explanation:
given data
coupon bonds = 5.8%
bonds price = $1,030
maturity time = 14 year
required return on the bonds = 5.1 percent
solution
we know here market price of the bond is Present Value of Coupon Payments + Present face Value
so that face Valueof bond = $1,000
and here annual Coupon Amount will be
annual coupon amount = $1000 × 5.80%
annual coupon amount = $58
and here Market Price of the Bond will be
Market Price of Bond = Present Value of Coupon Payments + Present face Value ......................1
here Present Value of Coupon Payments at PVIFA 5.10% and 14 Years
Present Value Annuity Inflow Factor (PVIFA) = ....2
Present Value Annuity Inflow Factor =
Present Value Annuity Inflow Factor = 9.83566
and
Present Value Inflow Factor (PVIF) 5.10%, 14 Years= ...........3
Present Value Inflow Factor (PVIF) =
Present Value Inflow Factor = 0.49838
so
Market Price of Bond = ( $58 × 9.83566 ) + ( $1,000 × 0.49838 )
Market Price of Bond = $1,068.85
so total rate of return on the Bond will be
total rate of return on the Bond = [ { Annual Coupon Amount + ( Change in Bond Price ) } ÷ Current Price] ...............4
total rate of return on the Bond =
total rate of return on the Bond = 9.40%
Answer:
-11.8%
Explanation:
the key to answer this question is to remember that valuation of a bond depends basically of calculating the present value of a series of cash flows, so let´s think about a bond as if you were a lender so you will get interest by the money you lend (coupon) and at the end of n years you will get back the money you lend at the beginnin (principal), so applying math we have the bond value given by:
so in this particular case that one year later there are 29 years to maturity so we have:
so as we have a higher rate the investment has the next return: