Summarize the different ways someone could earn money by owning a share of Exxon.
1 answer:
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Answer:
a.
Bond Price = $563,333.90007 rounded off to $563,333.90
b.
Bond Price = $502500
c.
Bond Price = $437232.16025 rounded off to $437232.16
Explanation:
To calculate the quote/price of the bond today, which is the present value of the bond, we will use the formula for the price of the bond. As the bond is a semi annual bond, we will use the semi annual coupon payment, semi annual number of periods and semi annual YTM. The formula to calculate the price of the bonds today is attached.
a. Case A: Market interest rate (annual): 4 percent
Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075
Total periods remaining (n) = 7 * 2 = 14
r or YTM = 4% * 6/12 = 0.02 or 2%
Bond Price = 15075 * [( 1 - (1+0.02)^-14) / 0.02] + 502500 / (1+0.02)^14
Bond Price = $563,333.90007 rounded off to $563,333.90
b. Case B: Market interest rate (annual): 6 percent
Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075
Total periods remaining (n) = 7 * 2 = 14
r or YTM = 6% * 6/12 = 0.03 or 3%
Bond Price = 15075 * [( 1 - (1+0.03)^-14) / 0.03] + 502500 / (1+0.03)^14
Bond Price = $502500
c. Case C: Market interest rate (annual): 8.5 percent.
Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075
Total periods remaining (n) = 7 * 2 = 14
r or YTM = 8.5% * 6/12 = 0.0425 or 4.25%
Bond Price = 15075 * [( 1 - (1+0.0425)^-14) / 0.0425] + 502500/(1+0.0425)^14
Bond Price = $437232.16025 rounded off to $437232.16
Answer:
The answer is attached below
Explanation:
Answer: <u>$4,500</u>
Explanation:
Equipment was purchased for $76,000.
It has an estimated useful life of 8 years.
It will be sold for $4,000 after these 8 years so that is the salvage value.
With these figures depreciation per annum is calculated with the following formula;
=
= $9,000
The Equipment was purchased on July 1, Year 1. In Year 1 therefore it will only be in use for half the year and this is what it should b depreciated in light of.
Semi-annual Depreciation = 9,000/2
= <u>$4,500</u>