You did not post the complete question so I will write only the missing components below that is needed to answer the question and some important definitions.
Definitions:
PVIFA - present value interest factor of annuity
= number of regular intervals per year at which time the borrowed amount is to be paid back
= annual interest rate
= number of years to payoff the debt
We need to find the interest rate that equates the price we paid for the bond with the cash flows we received. The cash flows we received were $100 each year for two years and the price of the bond when we sold it. Also, remember the YTM on the bond has declined by 1 percent.
Let us assume a par value of $1,000. we need to find the price of the bond in two years. The price of the bond in two years, at the new interest rate, will be:
$100(PVIFA8.42%,17) + $1,000(PVIF8.42%,17) = $1,139.69
Answer:
Therefore, the bond will sell for $
1,139.69 ± 0.1%
I think your answer should be c. Hope this helps. :)
Answer:
c
Explanation:
here are their assumptions
- All expectations on expected cash flows are homogenous
- bonds and shares are traded in perfect markets - there are no transaction costs. two investments with identical cash flows, terms and risk must trade at the same price
- investors can borrow and lend at the risk free rate
- there are no agency cost
- investing and financing decisions are independent of each other
Answer:
The correct answer is D. externalities.
Explanation:
An externality is defined as that situation or group of situations that determine that a service good is not reflected at its real market price. In this example, the computer industry is so close that they do not know for sure the benefits they have when offering their goods, and it becomes an advantage in the sense that due to its close location it is possible to establish agreements to manage prices and not enter into direct market competition.
