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omeli [17]
3 years ago
9

You buy a 6% coupon $1,000 par T-bond 59 days after the last coupon payment. Settlement occurs in two days. You become the owner

61 days after the last coupon payment (59+2), and there are 121 days remaining until the next coupon payment. The bonds clean price quote is 120.59375. What is the full or dirty price (sometimes called the invoice price)
Business
1 answer:
AfilCa [17]3 years ago
4 0

Answer:

dirty price: 1,225.39

Explanation:

When we purchase the bond, we are paying the bond and the accrued interest

<em>bond price:</em> 1,000 x 120.59375/100 = 1,205.9375‬ = 1,205.94

accrued interest at purchase:

face value x bond coupon rate x time

1,000 par value x 6% x 59/(59+2+121) =

1,000 x 0.06 x 59/182 = <em>19,45</em>

Total amount for the bonds: 1,205.94 + 19.45 = 1,225.39

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The prize is really worth $1,006,512.21.

<h3>What is present value?</h3>

Present value is the sum of cash flows discounted at the rate of interest or the discount rate.  The annual cash flows for the next 10 years = $1.5 million / 10 = 150,000

The present value can be determined using a financial calculator

Cash flow from year 1 to 10 = $150,000

Discount rate = 8%

Present value = $1,006,512.21

Here is the complete question: You win a lottery with a prize of $1.5 million. Unfortunately the prize is paid in 10 an¬nual installments. The first payment is next year. How much is the prize really worth? The discount rate is 8 percent.

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2 years ago
The term ___________________ describes the proportion of deposits that the bankmust hold in the form of reserves that are not lo
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Two Scoops uses the information to track cash, sales revenue, and expenses daily. This type of accounting system facilitate effective decision making by the following ways.

<h3>What is accounting system?</h3>

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Effective decision making through given accounting system are-

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Caspian Sea is considering raising $33.00 million by issuing preferred stock. They believe the market will use a discount rate o
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1,212,723 shares

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Value of issuing preferred stock = $33,000,000

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