1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Sauron [17]
3 years ago
10

Matt purchased a 20-year par value bond with an annual coupon rate of 8% compounded semiannually for a price of 1722.25. The cou

pons begin paying 6-months after the bond is purchased, and the bond can be called at par value X on any coupon date starting at the end of year 15, after the coupon is paid. The price guarantees that Matt will receive a nominal annual yield rate of at least 6% compounded semiannually. Note: The price guarantees that the yield will be a minimum of 6%. Find X (a) 1460 (b) 1440 (c) 1420 (d) 1400 (e) 1380
Business
1 answer:
finlep [7]3 years ago
4 0

Answer:

(b) 1440

Explanation:

As the coupon rate of 8% is greater than the yield to maturity (YTM) of 6% annually, the bond is selling at a premium. Hence, the bond will be called at the earliest i.e. 15 years.

Coupon = Call Price * Semi-annual coupon rate = X * [0.08 / 2] = X * 0.04

Yield to call = 6% annually = 3% semi-annually

Time = 15 years * 2 = 30

We know that,

Current Price of bond = Coupon * [1 - (1 + YTC)-call date] / YTC + Call Price / (1 + YTC)call date

  • 1,722.25 = [X * 0.04] * [1 - (1 + 0.03)-30] / 0.03 + [X / (1 + 0.03)30]

  • 1,722.25 = [X * 0.04] * 19.60 + [X * 0.41]

  • 1,722.25 = X * [(0.04 * 19.60) + 0.41]

  • 1,722.25 = X * 1.194

  • X = 1,722.25 / 1.194
  • X=$ 1,442.42 \approx $ 1,440

You might be interested in
The Ayayai Corp. purchased $7990 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inven
sesenic [268]

Explanation:

The adjusted journal entry is shown below:

Corp Laundry supplies Expense A/c Dr $6,580

       To Corp Laundry supplies A/c $6,580

(Being the corp supplies expense is recorded)

It is computed below:

= Purchased value of laundry supplies - still on hand

= $7,990 - $1,410

= $6,580

The answer is correct but The options that are given are incorrect.

8 0
3 years ago
Mark is an excellent cook. He does not have any formal training but learned to cook by following the recipes of several famous c
leva [86]
Self-interest of course! Though you gave us no clue as to who is Adam... You can tell it's mostly self-interest due to the fact that he hasn't taken any class or anything on it. Looks to me that he genuinely just loves cooking!
4 0
3 years ago
Read 2 more answers
The budget for the City of Goodville for the year ending December 31 was adopted and recorded on January 2 of the same year. Aft
scoray [572]

Answer:

See below

Explanation:

A budgetary fund is an income account and thus a debit balance suggests a deficit on the fund account. This means that governing bodies of City of Goodville have spent more money in their expenditures than they have brought in as income from the fund. This will be recorded as a liability in the balance sheet. Where as a credit balance would be a surplus and recorded as  an asset.

3 0
3 years ago
Bellingham Company produced 2,500 units of product that required 6 standard direct labor hours per unit. The standard variable o
VMariaS [17]

Answer: -$2,350

Explanation:

First we will calculate the labour costs of the product as,

Standard labour overheads required,

= 2,500*6

= $15,000

Using the above figure we will then calculate the Standard Overhead Cost as,

Standard overhead cost

= 4.9* 15,000 hours

= $73,500

But the Actual overhead cost = $71,150

The Variance is calculated as,

= standard overhead cost - actual overhead cost

= 73,500 - 71,150

= $2,350 Favorable.

= -$2,350

If you need any clarification do react or comment.

3 0
3 years ago
If ideal weather conditions result in a bumper crop of Florida oranges, then the a. supply of oranges will increase and the pric
8090 [49]

Answer:

a. supply of oranges will increase and the price of oranges will fall.

Explanation:

The crop will have impact on the producer of oranges, their field  will have a better yields so, more orange supply. The supplier fixed cost will be distribute among more orange thus, her average cost will be lower.

If the cost is lower, then the price will decrease as well. This will generate an equilibrium cost at more quantity with a lower price.

4 0
3 years ago
Other questions:
  • One measure of the extent of competition in an industry is the concentration ratio. What level of concentration indicates that a
    13·1 answer
  • Which is an example of an electronic storefront?
    8·1 answer
  • How would a sale of $400 of inventory on credit affect the balance sheet if the cost of the inventory sold was $160
    5·1 answer
  • Once Arnold Patel had decided he wanted to quit working as a Web designer for a large advertising agency and go into some kind o
    12·1 answer
  • Why would this be a better career choice than some of the other points she was looking for
    14·1 answer
  • Smashed Pumpkins Co. paid $88 in dividends and $526 in interest over the past year. The company increased retained earnings by $
    7·1 answer
  • Lunker Lures makes ten different models of fishing lures. All ten models are completely crafted by hand using the same basic mat
    8·1 answer
  • Listing the pros and cons for each of your options is a part of which step in the decision-making process?.
    11·1 answer
  • 3. A 9.3% annual coupon bond with a 10-year maturity and a $1,000 par value has a yield to maturity of 8%. Assuming that the yie
    14·1 answer
  • Starbucks is a global company that provides high-quality coffee products. Assume that as part of its expansion strategy, Starbuc
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!