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stich3 [128]
3 years ago
7

A 20-year maturity bond pays interest of $90 once per year and has a face value of $1,000. Its yield to maturity is 10%. Over th

e upcoming year, you expect interest rates to decline and that the yield to maturity on this bond will only be 8% a year from now. Using horizon analysis, the return you expect to earn by holding this bond over the upcoming year is _________.
Business
1 answer:
leonid [27]3 years ago
6 0

Answer:

Return = 29.64%

Explanation:

As per the data given in the question,

Time = 20 years

Interest = $90

Face value = $1,000

Rate = 10%

Current price of the bond = interest [1 - (1-rate)^(-time)] ÷ rate + Face value × (1+r)^(-time)

= 90 [1 - (1-0.10)^(-20)] ÷ 0.10 + $1,000 × (1+0.10)^(-20)

= 90 × 8.5136 + $1,000 × 0.14864

= $914.864

Price of the bond after 1 year = 90[1-(1-0.08)^(-19)] ÷ 0.08 + $1,000 × (1+0.08)^(-19)

= 90 × 9.6036 + $1,000 × 0.23171

= $1,096.04

Return = Ending price + Coupon - Beginning price ) ÷ Beginning price

= ($1,096.04 + 90 - $914.864) ÷ $914.864

= 0.2964  

= 29.64 %

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Lady_Fox [76]

Due to its ease of accommodating an increase in production, the representative firm in monopolistic competition typically has excess capacity over time.

<h3>What will happen if a monopolistic, rival business raises its price?</h3>

However, customers have the option to purchase a comparable product from another company if a monopolistic rival increases its price. When a dominant rival raises prices, it will not lose as many clients as a business operating in perfect competition, but it will lose more clients than a monopoly.

<h3>Why does monopolistic competition have excess capacity?</h3>

Natural monopolies or monopolistic competition both have excess capacity as a feature. It could take place as a result of businesses having to make lumpy or indivisible investments to boost capacity as demand rises.

Learn more about monopolistic competition: brainly.com/question/28189773

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2 years ago
Anna loves adidas apparel for its style and comfort. she is in need of running pants and purchases a pair with the adidas logo.
dybincka [34]
<span>This is a decision is a limited decision because it's something that's not routinely bought but also not extensive (as in very high priced that you would consult several people about). Anna might do a bit of research about the brands of running pants and realize Adidas is the brand for her.</span>
6 0
3 years ago
Suppose a relative has promised to give you $1,000 as a wedding gift the day you get engaged. Assuming a constant interest rate
Vlada [557]

Answer:

Date Received       Present Value      Value in 1 Year    Value In 2 Years

today                       $1,000                  $1,050                 $1,102.50          

in 1 year                   $952.38               $1,000                 $1,050

in 2 years                $907.03               $952.38               $1,000      

The present value of the gift is <u>LOWER (BY $45.35)</u> if you get engaged in two years than it is if you get engaged in one year.

Explanation:

to determine future value:

future value = present value x (1 + interest rate)ⁿ

to determine present value:

present value = future value / (1 + interest rate)ⁿ

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3 years ago
The city has proposed a number of water treatment and conservation projects the cost of which raises water bills high enough so
chubhunter [2.5K]

Answer:

b. at a cost raising water bills so high that.

Explanation:

From the description of the sentence, it shows that the action when performed would yield the observed outcome. The cost of the project which would result to an exorbitant rise of water bills has to be questioned.

Thus the most suitable option is b, so that the correct expression would be;

The city has proposed a number of water treatment and conservation projects at a cost raising water bills so high that even environmentalists are beginning to raise alarms.

8 0
3 years ago
Choi Company manufactures two skin care lotions, Smooth Skin and Silken Skin, from a joint process. The joint costs incurred are
mafiozo [28]

Answer:

The answer is "205,241"

Explanation:

Its relative value operation:

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A Unit sold                                            240000        \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \     110000

selling price per unit                           \$ \ 3.10   \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \               \$ \ 5.10            

Sales value                                 \$ \ 744,000  \ \ \ \ \ \ \ \ \ \ \ \$ \ 561,000 \ \ \ \ \ \ \ \ \ \ \  \$ \ 1,305,000

Join its cost allocate(360000 \times \frac{sales\ value}{1305000}) 205,241 \ \ \ \ \ \     154,759  \ \ \ \ \ \    360,000

Smooth Skin is assigned the combined costs within each development process by way of the relative cost process                                        205,241

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