All else constant, a bond will sell at a discount when the coupon rate is less than the yield to maturity. A coupon payment on a bond is the periodic interest payment which the bond holder receives during the time between when the bond is issued and when it matures. The annual coupon of a bond divided by its face value is called coupon rate.
Answer:
Present value = $24.009009 rounded off to $24.01
The maximum price that should be paid for a share today is $24.01
Explanation:
To calculate the price of the stock today that should be paid, we can use the discounted cash flow approach. It calculates the value of stock today based on the present value of future values of cash flows that are expected from the stock. Thus the present value of a stock that is expected to pay a dividend and sell for a given price in 1 year can be calculated as follows,
Present Value = [D1 + P1] / (1+r)
Where,
- D1 is the next dividend expected from the stock
- P1 is the price of the stock in 1 year
- r is the required rate of return
Present value = [1.65 + 25] / (1+0.11)
Present value = $24.009009 rounded off to $24.01
Answer: B
Explanation:
Leases can be classified as either operating leases or financing leases(also called capital leases). ITo know the difference of the two, one must be aware whether the risks and rewards associated with ownership of the asset have been fully transferred to the lessee from the lessor.
If these risks and rewards have been fully transferred, it is called a financing lease (financing leases are known as capital leases). Otherwise, it is an operating lease, which is basically the same as a landlord and tenant contract.
The answer & explanation for this question is given in the attachment below.