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WITCHER [35]
3 years ago
6

Delta Corporation has a bond issue outstanding with an annual coupon interest rate of 7 percent and 4 years remaining until matu

rity. The par value of the bond is $1,000. Determine the current value of the bond if present market conditions justify a 14 percent required rate of return. The bond pays interest annually.

Business
1 answer:
zvonat [6]3 years ago
6 0

Answer:

The current value of the bond is $796.04

Explanation:

The current value of a bond is the present value of all the cash inflows expected from the bond in the form of an annuity of interest payments and the term end face value payment discounted by the required rate of return or market interest rates. Thus, the current price of this bond will be,

Interest payment from the bond per year = 1000 * 0.07 = $70

The present value of ordinary annuity formula is attached in the answer.

Price = 70 * [ (1 - (1+0.14)^-4) / 0.14 ]  + 1000 / (1.14)^4

Price of the bond = $796.04

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The MU/P ratio for good X is greater than the MU/P ratio for good Y. To achieve consumer equilibrium, the consumer reallocates d
uysha [10]

Answer:

Falls:rises.

Explanation:

The MU/P (Marginal Utility/Price) ratio for good X is greater than the MU/P (Marginal Utility/Price) ratio for good Y. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. If the law of diminishing marginal utility holds, the marginal utility of good X falls and the marginal utility of good Y rises.

The law of diminishing marginal utility states that as the unit of a good or service consumed by an individual increases, the additional satisfaction he or she derives from consuming additional units would start decreasing or diminishing as the units of good or service consumed increases.

Also, the marginal utility of goods and services is the additional satisfaction that a consumer derives from consuming or buying an additional unit of a good or service.

Hence, the marginal utility of good X falls and the marginal utility of good Y rises because the consumer no longer derive satisfaction or benefits (utility) from the consumption of good X while he would switch to good Y for satisfaction.

7 0
3 years ago
credit cards should be used for what A. anything you want B. things you cant afford C. budgeting expenses you need to pay over t
zloy xaker [14]
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4 0
3 years ago
Gina made a down payment on a motorcycle. What incentive did she have for making a down payment?
8_murik_8 [283]

Answer:

A reduced time in debt

Explanation:

Gina intends to purchase that motorbike on credit. By making a down-payment, Gina is reducing the amount she needs to borrow to buy the bike.

A reduced loan amount means that Gina will require less to repay. It also implies that the interest to be paid will reduce. Making the down-payment helps Gina stay in debt for a short period.

7 0
3 years ago
A deadweight loss is a consequence of a tax on a good because the tax a. induces the government to increase its expenditures. b.
zalisa [80]

Answer:

B) induces buyers to consume less, and sellers to produce less.

Explanation:

Taxes are a necessary evil since they always increase the price of the goods and services that consumers buy and decrease the amount of money that producers receive from selling their goods and services. But taxes are necessary and unavoidable.

But once a market assumes all the effects of existing taxes it reaches an equilibrium price that both consumers and producers are satisfied with. If a new tax is levied than the deadweight losses are greater since consumer surplus and producer surplus are both reduced. This will lead to a reduction in the incentive that both consumers and producers have to engage in transactions. Many times consumers will substitute heavily taxed goods for other goods since they feel they are getting more from consuming those goods (consumer surplus). The same happens to producers, many producers will change their heavily taxed goods for other goods.

If the price elasticity of demand or supply of a certain good is large (elastic demand and supply), the deadweight loss will be greater.

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3 years ago
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