Employers must make matching contributions to: A income taxes

Wine and Roses, Inc., offers a bond with a coupon of 9.0 percent with semiannual payments and a yield to maturity of 9.78 percen

Mariana [72]

Answer:

The market price of the $1,000 face value bond is $961.12.

Explanation:

This can be calculated as follows:

Step 1: Calculation of the present value of the coupon (PVC) cash payments flow

To calculate this, we use the formula for calculating the PV of an ordinary annuity as follows:

PVC = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (1)

Where;

PVC = Present value of the coupon (PVC) payment = ?

P = Semiannual coupon amount = $1,000 × (9.0%/2) = $45

r = Yield to maturity rate = 9.78% annual = 9.78% ÷ 2 semiannually = 4.87% or 0.0487 semiannually

n = number of period = 7 years = 7 × 2 semiannul = 14 semiannual

Substitute the values into equation (1) to have:

PVC = 45 × [{1 - [1 ÷ (1+0.0487)]^14} ÷ 0.0487] = $448.59

Step 2: Calculation of the present value of the face value (PVFAV) of the bond

Since this is just a single amount, not a flow, we use the simple PV formula as follows:

PVFAV = FAV ÷ (1 + r)^n ……………………………………. (2)

Where;

PVFAC = Present value of the face value of the bond = ?

FAC = Face value of the bond = $1,000

r and n are as given in step 1 above

Substitute the values into equation (2) to have:

PVFAV = FAV ÷ (1 + 0.0487)^14 = $512.53

Step 3: Calculation of the market price of a $1,000 face value bond

The market price of a bond is the addition of the PV of expected cash flows and PV of the face value of the bond. For this question, the market price of a $1,000 face value bond can be calculated as follows:

Market price of the bond = PVC + PVFAC …………………………… (3)

Substituting the values already obtained in steps 1 and 2 above into equation (3), we have:

Market price of the bond = $448.59 + $512.53 = $961.12

Therefore, the market price of the $1,000 face value bond is $961.12.

6 0

3 years ago

Pretend you are a highschool student who makes minimum wage. You want to buy a new car, but you are $10,000 short. You are looki

Assoli18 [71]

Firstly, Loan A has a lower interest rate (0.25% lower) and therefore the interest payed is lower ($209.49 cheaper) and of course the total paid is lower for Loan A.

The benefit of Loan B is the term of payment is longer and the monthly repayments are lower. This could be good for someone working minimum wage due to having a low income.

In conclusion, I think Loan A would be better due to the interest being lower which is always a plus for loans.

4 0

3 years ago

You are depositing $4,500 today at an annual interest rate of 7.2 percent. How much additional interest will you earn if you lea

Liono4ka [1.6K]

Answer:

$30,185.144

Explanation:

Deposit = $4,500

Annual Interest rate = 7.2%

Amount after 45 year = Deposit x ( 1 + interest rate )^45

Amount after 45 year = $4,500 x ( 1+ 7.2% )^45

Amount after 45 year = $4,500 x ( 1+ 0.072 )^45

Amount after 45 year = $4,500 x ( 1.072 )^45

Amount after 45 year = $102,796 .388

Amount after 40 year = Deposit x ( 1 + interest rate )^40

Amount after 40 year = $4,500 x ( 1+ 7.2% )^40

Amount after 40 year = $4,500 x ( 1+ 0.072 )^40

Amount after 40 year = $4,500 x ( 1.072 )^40

Amount after 40 year = $72,611 .252

Additional Interest = Amount after 45 year - Amount after 40 year

Additional Interest = $102,796.388 - 72,611.252

Additional Interest = $30,185.136

7 0

3 years ago

Wiskurv Inc. is a large electronics supplier that does not rely exclusively on traditional financial measures for organizational

natta225 [31]

Answer: Balanced structure

Explanation:

A balanced structure is basically refers to the balanced sentence where the sentences are made up of equally in the term of length and also properly structure grammatically then the sentence is known as balanced structure.

According to the given scenario, the Wiskurv Inc. is one of the large electronic organization and this company most likely using the valanced structure for the financial and the operational measuring factors.

Therefore, Balanced structure is the correct answer.

4 0

3 years ago

An investor borrows an amount at an annual effective interest rate of 5% and will repay all interest and principal in a lump sum

Artist 52 [7]

Answer:

$74.14

Explanation:

first we must calculate the market price of the bond:

0.03 = {40 + [(1,000 - MV)/20]} / [(1,000 + MV)/2]

0.03 x [(1,000 + MV)/2] = 40 + [(1,000 - MV)/20]

0.03 x (500 + 0.5MV) = 40 + 50 - 0.05MV

15 + 0.015MV = 90 - 0.05MV

0.065MV = 75

MV = 75 / 0.065 = $1,153.85

so the customer borrowed $1,153.85

in 10 years, the principal + interest will = $1,153.85 x (1 + 5%)¹⁰ = $1,879.50

the customer will receive:

20 semiannual payments of $40, the future value = $40 x 22.841 (FV annuity factor, 2%, 19 periods) + $40 = $953.64

bond's face value = $1,000

total money received = $1,000 + $953.64 = $1,953.64

net gains = $1,953.64 - $1,879.50 = $74.14

3 0

4 years ago