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Flauer [41]
3 years ago
13

Union Local School District has bonds outstanding with a coupon rate of 3.1 percent paid semiannually and 22 years to maturity.

The yield to maturity on these bonds is 3.4 percent and the bonds have a par value of $10,000.
What is the price of the bonds?
Business
1 answer:
arlik [135]3 years ago
5 0

Answer:

The price of the bond is $9,537.91

Explanation:

Coupon payment = $10,000 x 3.1 = $310 / 2  = $155

Number of period = n = 22 x 2 = 44 semiannual periods

Face Value = $10,000

Yield to maturity = 3.4% yearly = 3.4% /2 = 1.7% semiannually

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

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

Price of the Bond =$155 x [ ( 1 - ( 1 + 1.7% )^-44 ) / 1.7% ] + [ $10,000 / ( 1 + 1.7% )^44 ]

Price of the Bond = $155 x [ ( 1 - ( 1.017 )^-44 ) / 0.017 ] + [ $10,000 / ( 1.017 )^44 ]

Price of the Bond = $4,774.94 + $4,762.97

Price of the Bond = $9,537.91

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Maxwell Communications paid a dividend of $1.35 last year. Over the next 12 months, the dividend is expected to grow at 11 perce
PilotLPTM [1.2K]

Answer:

Current dividend paid (Do) = $1.35

Growth rate (g) = 11% = 0.11

Cost of equity (ke) = 24% = 0.24

Po = Do<u>(1 + g)</u>    

           Ke - g

Po = $1.35<u>(1 + 0.11)</u>

                 0.24 - 0.11

Po = <u>$1.4985</u>

            0.13

Po = $11.53                                                                                                                                                                                                                

Explanation:

The current market price of the stock is a function of current dividend paid, subject to growth rate, divided by the current market price of the stock.

4 0
3 years ago
Ramsey Corporation desires to earn target net income of $90,000. If the selling price per unit is $30, unit variable cost is $24
Stels [109]

Answer:

b. 75,000 units

Explanation:

Fixed cost = $360,000

Target net income = $90,000

Selling price per unit = $30

Unit variable cost = $24

The computation of net income is shown below :-

= (Fixed expenses + target profit) ÷ (Contribution margin per unit)

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $30 - $24

= $6

So, the net income is

= ($360,000 + $90,000) ÷ ($6)

= ($450,000) ÷ ($6)

= 75,000 units

7 0
3 years ago
The gas station on the edge of town has gas that is 30c/gallon cheaper than my local station. I buy 10 gallons of gas a week. As
Tems11 [23]

Answer:

No

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3 0
3 years ago
During 2022, Bramble Corp. reported cash provided by operations of $778000, cash used in investing of $672000, and cash used in
Murrr4er [49]

Answer:

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Cash provided by operations = $778,000

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Cash used in financing = $186,000

Cash spent on fixed assets during the period = $270,000

Average current liabilities = $637,000

Average total liabilities = $1,682,000

Free cash flow = Cash flow from operating activities - Capital expenditures

= $778,000 - $270,000

= $508,000

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3 years ago
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