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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

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Nav is the net assets valuation which is the value of the total assets held in a portfolio.
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1. Improvements in technology.2. Increases in the supply (stock) of capital goods.3. Purchases of expanding output.4. Obtaining
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Several market participants interact in developed markets to organize the exchange of funds from buyers to sellers. Such institu
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3 years ago
On March 31, 2019, the balances of the accounts appearing in the ledger of Racine Furnishings Company, a furniture wholesaler, a
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Answer:

Net Income   $66100

Explanation:

<u>Racine Furnishings Company </u>

<u>Multi Step Income Statement </u>

<u>For the Year Ended March 31, 2019</u>

Sales                                                   6,126,850

Cost of Merchandise Sold                3,965,850

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Selling Expenses                           717,650

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Net Income                                       $66100

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