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krok68 [10]
3 years ago
6

A 10-year $1,000 bond pays a nominal rate of 9% compounded semi-annually. If the market interest rate is 12% compounded annually

and the general inflation rate is 6% per year, find the actual-and constant-dollar amounts (in time-0 dollars) of the 15th interest payment on the bond.
Business
1 answer:
skelet666 [1.2K]3 years ago
3 0

Answer:

a) actual dollar = $60

b) Constant dollar of the 15th payment = $38.710

Explanation:

Facts from the question:

The Face value of the bond = $1,000

Nominal Interest rate = 12% and it compounded annually

General inflation rate = 6%

The question: Determine the 15th interest payment on the bond.

Step 1: The coupon for the amount of semi annual payment is as follows:

Coupon= (Interest rate/ Number of compounding times in a year) x face value of the bond

= (0.12/2) x 1000

= $60 -= Actual dollar amount

Step 2: Determine the 15th payment and this will represent the middle of the 8th year or (7 1/2) year.

To calculate this=

Constant dollar amount of the 15th interest payment

= Actual dollar amount (above) / (1 + inflation rate)∧n

where n= the number of years = 7.5 years

= $60 / (1 + 0.06) ∧7.5

= $60/1.55

= $38.710

This means the constant dollar amount on that 15th payment = $38.710

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malfutka [58]

Answer: Charging one price at all times for all customers (D)

Explanation:

Price discrimination is a pricing strategy where identical or similar goods or services are sold at different prices by the same producer to the customers. In price discrimination, companies charge customer different prices based on the willingness and ability of the customers to pay.

This can be seen on cinemas as people are charged different prices and airline companies. In the question above, charging a lower price for children, matinees and people over 65years are price discrimination. For price discrimination not to exist, everyone must pay the same price for enjoying similar good or service.

5 0
3 years ago
Exercise 13-02 The following are selected 2020 transactions of Sandhill Corporation.
Lorico [155]

Explanation:

a. The journal entries are as follows:

1. Purchase A/c Dr $52,000

     To Account payable A/c $52,000

(Being the purchase of inventory is recorded)

2. Account payable A/c $52,000

           To Notes payable A/c

(Being the payment is done via note payable)

3. Cash A/c Dr $52,000

Discount on Note payable A/c Dr $4,400

       To Note payable A/c $56,400

(Being the borrowed amount is recorded)

b.

Interest expense A/c Dr $1,040

      To Interest payable A/c $1,040

(Being the interest expense is recorded)

The computation is shown below:

= $52,000 × 8% × 3 months ÷ 12 months

= $1,040

Interest expense A/c Dr $1,040      ($4,160 × 3 months ÷ 12 months)

     To Discount on notes payable A/c $1,040

(Being the interest expense is recorded)

c. Now the total net liability is

i. For the interest-bearing note

= Note payable + interest payable

= $52,000 + $1,040

= $53,040

ii. For zero-interest-bearing note

= $56,400 - $3,120      ($4,160 - 1,040)

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2 years ago
BBQ Corporation has a target capital structure that is 70 percent equity, 30 percent debt. The flotation costs for equity issues
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Answer:

$172,215,844 is the cost when flotation costs are considered

Explanation:

<em>flotation</em>

Weighted average flotation cost = {(Flotation cost debt * Weight debt) + (Flotation cost equity * Weight equity)

= (8% * 0.30) + (15%  * 0.70)

=0.024 + 0.105

= 0.129

= 12.9%

Calculation of the cost of funds

Cost of funds = Amount raised / (1 - Weighted average floatation cost)

= $150,000,000 / (1-0.129)

= $150,000,000 / (0.871)

=$172,215,844

Therefore, the cost of raising fund is $172,215,844

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Answer:

B. a finance professor who knows a lot of investment theory

Explanation:

The efficient market theory can be regarded as efficient market hypothesis, it is one that stressed that

all information are been reflected by

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3 0
2 years ago
Which branch of government has exercised the most power regarding race to the top, common core standards, and its assessments? w
Ierofanga [76]

For the first question, the answer is the judicial branch of the government since it is the one who ordain and establishes. The Judicial branch construes the laws. The judiciary also offers a tool for the resolution of arguments.

For the second question, the answer is the executive branch of the government. The executive is the structure exercising authority in and holding accountability for the power of a state. The executive implements and imposes law. 

4 0
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