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3 years ago

Both Bond Bill and Bond Ted have 5.8 percent coupons, make semiannual payments,

Business

1 answer:

viva [34]3 years ago

5 0

Answer:

Percentage change in Bill Price = (91.8486 - 100) / 100 = -0.0815 or -8.15%

Percentage change in Bill Price = (78.1448 - 100) / 100 = -0.2186 or -21.86%

Percentage change in Bill Price = (109.0298 - 100) / 100 = 0.0903 or 9.03%

Percentage change in Bill Price = (132.0946 - 100) / 100 = 0.3209 or 32.09%

Explanation:

To calculate the percentage change in the price of both the bonds, we assume that the par value of both the bonds is $100 each.

To calculate the price of the bond today, we will use the formula for the price of the bond. We assume that the interest rate provided is stated in annual terms. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,

Coupon Payment (C) both Bill and Ted = 100 * 0.058 * 6/12 = $2.9

Total periods (n) - Bill= 5 * 2 = 10

Total periods (n) - Ted= 25 * 2 = 50

As the bonds were previously price at par, the YTM or market interest rate would have been same as the coupon rate. Thus, the old market interest rate was 5.8%. Now as the interest rates have risen by 2% new interest rate will be = 5.8 + 2 = 7.8%

New r or YTM - both Bill and Ted = 7.8% * 6/12 = 3.9% or 0.039

The formula to calculate the price of the bonds today is attached.

Bond Price - Bill = 2.9 * [( 1 - (1+0.039)^-10) / 0.039] + 100 / (1+0.039)^10

Bond Price - Bill = $91.8486

Percentage change in Bill Price = (91.8486 - 100) / 100 = -0.0815 or -8.15%

Bond Price - Ted = 2.9 * [( 1 - (1+0.039)^-50) / 0.039] + 100 / (1+0.039)^50

Bond Price - Ted = $78.1448

Percentage change in Bill Price = (78.1448 - 100) / 100 = -0.2186 or -21.86%

As the bonds were previously price at par, the YTM or market interest rate would have been same as the coupon rate. Thus, the old market interest rate was 5.8%. Now as the interest rates have fallen by 2% new interest rate will be = 5.8 - 2 = 3.8%

New r or YTM - both Bill and Ted = 3.8% * 6/12 = 1.9% or 0.019

The formula to calculate the price of the bonds today is attached.

Bond Price - Bill = 2.9 * [( 1 - (1+0.019)^-10) / 0.019] + 100 / (1+0.019)^10

Bond Price - Bill = $109.0298

Percentage change in Bill Price = (109.0298 - 100) / 100 = 0.0903 or 9.03%

Bond Price - Ted = 2.9 * [( 1 - (1+0.019)^-50) / 0.019] + 100 / (1+0.019)^50

Bond Price - Ted = $132.0946

Percentage change in Bill Price = (132.0946 - 100) / 100 = 0.3209 or 32.09%

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Answer: 13.2%

Explanation:

Given data:

No of stores in the market = 5000

No. of store owners = 2000.

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Sam charges = $8/month.

Solution:

The market penetration rate would be calculated based on potential customers.

Using our general formula,

Market penetration=Numbers of customers who purchased Allison derived sales and Sam derived sales /Total potential population

Where,

Total potential population=1,500

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2 years ago

Many routine business messages involve such things as teams coordinating their assignments, customers buying products, and colle

Eddi Din [679]

Answer:

d. requests.

Explanation:

Based on the scenario being described within the question it can be said that such messages are known as requests. These are technically messages from one member of a business to another member in order to ask for a certain good, service, or action to be taken by the second member. Such as attending a meeting or assigning an assignment.

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3 years ago

Read 2 more answers

You can buy property today for $2.2 million and sell it in 5 years for $3.2 million. (You earn no rental income on the property.

Stolb23 [73]

Answer:

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Explanation:

We will calcualte the present value of the sale price using the present value of a lump sum formula:

$\frac{Maturity}{(1 + rate)^{time} } = PV$

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time 5 years

rate 10% = 10/100 = 0.1

$\frac{3200000}{(1 + 0.1)^{5} } = PV$

PV $1,986,948.2338

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