Calculate Producer Surplus if Reservation Price=20, Price=8, & Quantity=10.
1 answer:
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Complete question:
Security Term (years) Yield (%)
Treasury 2 0 5.5%
AAA Corporate 2 0 7.0%
BBB Corporate 20 8.0%
B Corporate 2 0 9.6%
Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons, a coupon rate of 7%, and a face value of $1000. Wyatt Oil believes it can get a BBB rating from Standard and Poor's for this bond issue. If Wyatt Oil is successful in getting a BBB rating, then the issue price for these bonds would be closest to:
A) $891 B) $901 C) $1,000 D) $800
Answer:
If Wyatt Oil is successful in getting a BBB rating, then the issue price for these bonds would be closest to: $901
Solution:
Given,
FV = 1000,
N = 40,
I = 4,
PMT = 35
Compute PV ,
PV =
PV = 901.04
If Wyatt Oil is successful in getting a BBB rating, then the issue price for these bonds would be closest to: $901
The compound interest formula is: 
Where:
A is the amount you will have.
P is the money you are investing.
r: is the interest rate (in decimals)
n: number of times the interest is compounded per year
t: time (in years)
The first thing is converting the rate from percentage to decimal:
Since the interest is compounded every month and a year has 12 months n=12.
Now we can replace the values in our formula:
We can simplify the exponents to get:
Finally, we can use our calculator to get 288463.33
After 18 your balance in your bank account will be $288463.33
Where:
A is the amount you will have.
P is the money you are investing.
r: is the interest rate (in decimals)
n: number of times the interest is compounded per year
t: time (in years)
The first thing is converting the rate from percentage to decimal:
Since the interest is compounded every month and a year has 12 months n=12.
Now we can replace the values in our formula:
We can simplify the exponents to get:
Finally, we can use our calculator to get 288463.33
After 18 your balance in your bank account will be $288463.33