Answer:
Explanation:
Pretax cost of debt is the annual rate(YTM) of the bond. Using a financial calculator, input the following to calculate it;
N = 5*2 = 10
PV = -(95% *10,000,000) = -9,500,000
Coupon PMT = (6%/2)*10,000,000 = 300,000
FV = 10,000,000
then compute semiannual rate; CPT I/Y = 3.604%
convert to annual rate = 3.604*2 = 7.21%(this is the pretax cost of debt)
After tax cost of debt is calculated because interest payable on debt has tax shield. The formula is as follows;
Aftertax cost of debt = pretax cost of debt (1-tax)
AT cost of debt = 7.21% (1-0.40)
AT cost of debt = 4.33%
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First we must calculate the expected return of the P portfolio: 0,60 x 0,14 + 0,40 x 0,10 = 0,124 = 12,4%.
The weight of the T banknotes in the total portfolio will be equal to the total weight less, the portfolio P. If the weight of the portfolio p is "w"
T = 1 - w
The expected return of the entire portfolio must be 11%
0.11 = w x 0.124 + (1 - w) x 0.05
w = 0,81.
Then, the amount invested in the Portfolio P = 0.81 * $ 1000 = $ 810
Then, the amount invested in banknotes T = 0.19% of $ 1000 = $ 190
you should invest 19% of your complete portfolio in Treasury bills
Explanation:
An easy way of remembering the difference between the two is that CSI is one of the components of CSR. Investing in the community is part of a company's responsibility as a corporate citizen.