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Lera25 [3.4K]
3 years ago
5

Suppose a $1,000 bond pays $40 per year in interest. Instructions: In part a, round your response to one decimal place. In part

b, round your response to two decimal places. a. What is the contractual interest rate ("coupon rate") on the bond? 4 % b. If market interest rates rise to 5 percent, what price will the bond sell for? $
Business
1 answer:
Lubov Fominskaja [6]3 years ago
5 0

Answer:

The correct answer for option (a) is 4% and for option (b) is $800.

Explanation:

According to the scenario, the computation for the given data are as follows:

Face value = $1,000

Annual interest = $40

Interest rate = 5%

(a). We can calculate the contractual interest rate by using following formula:

Contractual interest rate = Annual interest ÷ Face value

= $40 ÷ $1000

= 0.04 or 4.0%

(b). we can calculate the price of bonds by using following formula:

Price of bonds = Annual interest ÷ Market interest rate

= $40 ÷ 5%

= $800.00

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Three individuals, Mary, Jack and Helen, make up the total demand for donuts per month in a particular market.
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The market demand curve would be 1000 - 0.125Q.

<h3>How to calculate the demand curve?</h3>

It should be noted that the market demand curve will be the sum of the individual demand curve.

The market demand curve will be calculated thus. Mary’s demand curve is 5P = 5000 – 1.25QM. Here, p = 1000 - 0.25QM

Jack’s demand curve for donuts is given by P = 1000 – 0.5QJ. Helen’s demand curve is given by QH = 2000 – 2P. This will be P = 1000 - 0.5QH.

The slope will be:

= 0.5 × 0.25

= 0.15

The demand function of Jack and Helen are the same. The demand curve will be 1000 - 0.125Q.

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5 0
2 years ago
Martin Enterprises needs someone to supply it with 120,000 cartons of machine screws per year to support its manufacturing needs
ANEK [815]

Answer:

The Bid Price you should submit is $15.45

Explanation:

NPV = -795000 + 143000*(1-21%)/1.09^5-70000 + 70000/1.09^5 + ((120000*(P-10.15) - 435000 - 795000/5)*(1-21%) + 795000/5)/0.09*(1-1/1.09^5)

        => -795000 + 143000*(1-21%)/1.09^5 - 70000 + 70000/1.09^5 +((120000*(P-10.15) - 435000 - 795000/5)*(1-21%) + 795000/5)/0.09*(1-1/1.09^5) >=0

      =>P = 15.446118865171

Therefore, The Bid Price you should submit is $15.45

6 0
3 years ago
As a business owner, you're responsible for making the decisions that pertain to the profitability of your business. This decisi
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As a business owner, one thinks and acts based on one's personal volition of what is best for his or her business without having to sit and discuss with a group of individual's who may habiur different perceptions or scope. This freedom is usually enjoyed by small business owners rather than large groups of companies or corporations.

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3 years ago
Lakeview Company completed the following two transactions. The annual accounting period ends December 31.
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Answer: Check attachment and explanation.

Explanation:

a. The question has been solved. Check the attachment.

b. LAKEVIEW COMPANY

Balance sheet (Partial)

December 31

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