Answer:
By January 1, 2006 the price of the bonds=$50.675 M
Explanation:
The price of a bond at any given time can be expressed as;
Current price=(Annual coupon×((1-(1/(1+r)^i)/r)+ (face value/(1+r)^i)
where;
i-maturity period, from 2005-2006=1 year
r-nominal yield to maturity rate=8%
coupon rate=10%
face value=$50 M
Annual coupon=(10/100)×50 M=5 M
replacing;
Current price=Annual coupon×((1-(1/(1+r)^i)/r + face value/(1+r)^i
(5 M×((1-(1/(1+0.08)^1)/0.08)+50/(1+0.08)^1
(5 M×(1-0.93)/0.08)+46.3
(5×0.875)+46.3=4.375+46.3=50.675 M
By January 1, 2006 the price of the bonds=$50.675 M
Answer:
a. True
Explanation:
The real option should be used in the decision that made for the capital investment in order to rise the worth of the project. So it rise the capital investment value for the project. Also a real option in a capital asset provides the right to the investing firm but not the liability to purchase or sell or transform the asset at a fixed price
Therefore the given statement is true
I think it would be the fixed income market. Hope this helps you.
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Answer:
Sid should buy the company
Explanation:
given data
dividend = $1.70 per share
constant rate = 5%
required return = 11%
growth rate increase = 6.5%
increasing the required return = 12%
solution
we get here intrinsic value of the company in both by use Gordon Growth Model that is here present value
PV = ( Do × (1 + g) ) ÷ (r - g) .......................1
here Do is current dividend and g is growth rate and r is required rate of return
so here put value in current case
PV = ( 1.7 × (1 + 0.05) ) ÷ (0.11 - 0.05)
solve it we get
PV = $29.75 .............................2
and
now put value for buying company case
so
PV = ( 1.7 × ( 1 + 0.065)) ÷ ( 0.12 - 0.065)
solve it we get
PV = $32.92 ..............................3
so Sid should go ahead buying the company
Answer: products are standardized or homogeneous
Explanation:
Products are standardized or homogeneous for the perfectly competitive market as, in the case of the competitive industry there are no barriers in the industry to entry. The products are homogeneous in the nature and there is large numbers of the firms are perfectly substituted in the industry. So, the price elasticity of the demand for the firm product is infinite.
