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zubka84 [21]
3 years ago
8

A 30-year zero coupon bond with a face value of $5,000 is currently selling for $1,156.88 and has a market rate of interest of 5

%. Using the bond's modified duration, what is the approximate change in the price of the bond if interest rates fall to 4.25%
Business
1 answer:
daser333 [38]3 years ago
5 0

Answer:

Price will increase by $277.58

Explanation:

Market rate of Interest of a zero coupon bond can be determined by following formula

Market Rate of Interest = [ ( F / P )^(1/30) ] - 1

4.25% = [ ( $5000 / P )^(1/30) ] - 1

0.0425 + 1 = ( $5000 / P )^1/30

( 1.0425 )^30 = (( $5000 / P )^1/30)^30

3.4856 = $5000 / P

P = $5,000 / 3.4856

P = $1,434.46

Now Calculate the change in Price

Change in price = $1,434.46 - $1,156.88 = $277.58

Price will increase by $277.58

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Selected sales and operating data for three divisions of different structural engineering firms aregiven as follows: Division A
FinnZ [79.3K]

Answer and Explanation:

The computation is shown below:

A.

Return on investment = Margin × Turnover

Now

= (Net operating income ÷Sales) × (Sales ÷ Average operating assets)

Division A = ($414,000 ÷ $6,900,000) × ($6,900,000 ÷ $1,725,000)

= 6% × 4

= 24.00%

Division B = ($1,090,000 ÷ $10,900,000) × ($10,900,000 ÷ $5,450,000)

= 10% × 2

= 20.00%

Division C = ($325,000 ÷ $10,000,000) × ($10,000,000 ÷ $2,500,000)

= 3.25 × 4

= 13.00%

B.  

Residual Income = Net operating income - (Minimum required rate of return × Average operating assets)

Division A = $414,000 - (19% × $1,725,000)

= $414,000 - $327,750

= $86,250

Division B = $1,090,000 - (20% × $5,450,000)

= $1,090,000 - $1,090,000

= $0

Division C = $325,000 - (16% × $2,500,000)

= $325,000 - $400,000

= ($75,000)

3 0
2 years ago
What is the expected constant-growth rate of dividends for a stock currently priced at $50, that just paid a dividend of $4, and
Viktor [21]

Answer:

8.9

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid = d0 x (1 +g)  

r = cost of equity

g = growth rate

50 = [4 x (1 +g)] / (0.18 - g)

50(0.18 - g)  = 4(1 +g)

6 0
3 years ago
What are the three main types of economic systems?
otez555 [7]

Answer:

command, market, and mixed

3 0
2 years ago
The number-one cash crop in the united states was marijuana prior to 1890.
Ede4ka [16]

<span>A. </span>True. Based on the history of marijuana and other cannabis products, Marijuana was the number-one cash crop in the united states prior to 1890. Marijuana is a depressant and does not contain nicotine. It is a schedule I controlled substance, according to U.S. federal regulations where there is approximately 77% of illicit drug users smoke marijuana. The use of marijuana for medicinal purposes is illegal in the U.S but legal in Canada. The "reverse tolerance" turns out to be due to variations in the manner in which the drug is ingested is one of the long-term effect of Marijuana.





8 0
3 years ago
Timothy was driving his friend Nick to football practice. While driving, he was hit by a driver who had coverage of 100/300/50.
Art [367]

Answer:

A) The policy would provide a maximum of $100,000 for each person who was injured, and no more than $300,000 for total injuries of all parties in the accident.

Explanation:

The auto liability insurance policy held by the driver is an example of a split limit liability insurance. The split limit insurance of 100/300/50 is explained thus:

$100,000 - bodily injury liability insurance per person

$300,000 - Total bodily injury liability insurance per accident

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6 0
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