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Keith_Richards [23]
3 years ago
10

Assume a zero-coupon bond that sells for $270 and will mature in 25 years at $1,850. Use Appendix B for an approximate answer bu

t calculate your final answer using the formula and financial calculator methods. What is the effective yield to maturity? (Assume annual compounding. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Business
1 answer:
FromTheMoon [43]3 years ago
8 0

Answer:

8.00%

Explanation:

Data provided in the question:

Selling price of the bond i.e current value = $270

Future value = $1,850

Maturity time, t = 25 years

Now,

Effective yield to maturity, r = (\frac{\text{Future value}}{\text{Current value}})^{\frac{1}{t}}-1

on substituting the respective values, we get

Effective yield to maturity, r = (\frac{\$1,850}{\$270})^{\frac{1}{25}}-1

or

Effective yield to maturity, r = 1.0800 - 1

or

Effective yield to maturity = 0.0800

or

= 0.0800 × 100% = 8.00%

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You are given the following information for Watson Power Co. Assume the company’s tax rate is 24 percent. Debt: 14,000 6.3 perce
Alenkinab [10]

Answer:

10.18%

Explanation:

The computation of the WACC is shown below:

But before that following calculation is to be done

The value of debt is

= 14000 × $1,000 × 107%

= $14,980,000

The value of equity is

= 470,000 × $65

= $30,550,000

The value of preferred stock is

= 20,500 × $86

= $1,763,000

Now

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= $47,293,000

Now we find the cost of debt using excel function i.e.

= RATE(nper,pmt,pv,fv)) × 2

= RATE(29 × 2,1000 × 6.3% ÷ 2,-1000 × 107%,1000)) ×2

= 5.80%

Now  

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= 5.2% + 1.16 × 7%

= 13.32%

cost of preferred stock is

= (100 × 4.1%) ÷ 86

= 4.77%

Now finally  

WACC = weight of debt × cost of debt ×(1 - tax rate) + weight of equity × cost of equity + weight of preferred stock ×cost of preferred stock

= ($14,980,000 ÷ $47,293,000) × 5.80% × (1  - 24%)+($30,550,000 ÷ $47,293,000) × 13.32% + ($1,763,000 ÷ $47,293,000) ×4.77%

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5 0
3 years ago
The Classical Theory is based on the assumption that an economy has ______________ or, if nudged away, quickly returns to that c
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Answer:

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Therefore according to the given situation, the option c is the correct and the same is to be considered

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3 years ago
Bob and Lisa are both married, working adults. They both plan for retirement and consider the $2,000 annual contribution a must.
ikadub [295]

Answer

The answer and procedures of the exercise are attached in a microsoft excel document.  

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.  

Download xlsx
6 0
3 years ago
U.S. cola companies entered the global market because of:
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Answer:

C. limited growth opportunities in their domestic market.

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