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bearhunter [10]
3 years ago
6

How would you value a 1000 bond with 10% coupon rate?

Business
1 answer:
andreev551 [17]3 years ago
3 0

Question

<em>How would you value a 1000 bond with 10% coupon rate?</em>

<em>Assuming the bonds is repayable in five (5) years time with a yield of 11% per annum.</em>

Answer:

Value of bond = $948.54

Explanation:

<em>The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).  </em>

Value of Bond = PV of interest + PV of RV  

The value of bond of the can be worked out as follows:  

Step 1  

<em>PV of interest payments </em>

<em> </em>Annul interest payment<em>  </em>= 10% × 1000  = 100  

Annual yield = 11%

Total period to maturity (in years)  = 8 years  

PV of interest =  

100 × (1- 1.11^(-8)/)/ 0.11 =  514.612  

Step 2  

<em>PV of Redemption Value</em>  

= 1,000 × (1.11)^(-8) = 433.926

Step 3

<em>Price of bond </em>  

= 514.612 +  433.926  =  948.539

Value of bond = $948.54

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These two are cash equivalents:

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Because they represent short-term investments that a company makes with the goal of getting rid of any excess cash that would otherwise be left unused while it is losing value because of inflation.

In other words, the main goal of investments in money market funds and three-month treasury bills, is to prevent cash from losing value due to inflation, and because of that, those investments are considered cash equivalents.

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Differential Analysis for a Lease or Buy Decision
il63 [147K]

Answer:

Lease Equipment $150,000

BUY EQUIPMENT$134,700

Differential Effects-$15,300

The company should choose BUY EQUIPMENT which is Alternative 2

Explanation:

Preparation of the differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment

Differential Analysis

Lease (Alt. 1) or Buy (Alt. 2) Equipment

March 15

Lease Equipment (Alternative 1); Buy Equipment

(Alternative 2); Differential Effects (Alternative 2)

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Purchase price $0 $120,000 $120,000

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Total costs $150,000 $134,700 -$15,300

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4 0
3 years ago
Ano ang kasingkahulugan ng naalimpungatan.​
topjm [15]
Im sorry , i don’t understand .
but have a good day <33
7 0
3 years ago
2. At an oral auction for used car, half of all bidders have a value of $1,500 and half have a value of $1,900. What is the expe
Romashka [77]

Answer:  $1,700

Explanation:

The expected winning bid is the weighted average of the 2 different bids.

Half of the bids are for $1,500 so weight of $1,500 is 0.5.

Half of the bids are for $1,900 so weight of $1,900 is 0.5.

Expected Winning bid = (1,500 * 0.5) + ( 1,900 * 0.5)

= 750 + 950

= $1,700

7 0
3 years ago
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