Monica suggests that the larger size is usually a better buy. Lori is using a(n) "algorithm" ; Monica, a(n) "<span>heuristic".
Lori's technique is requesting or demanding, however ensured to disclose to her which can is the better purchase. Monica's strategy is brisk and simple, however it may not yield the right answer. </span>
Answer:
4.5 years
Explanation:
the change in price = $970 - $950 = $20
the change in rate of return = 7.7% - 8.2% = -0.5% or -0.005
to determine the duration of the bond we can use the following formula:
duration = (Δ price / price) / [Δ rate / ( 1 + rate)]
= ($20 / $970) / [-0.005 / ( 1 + 0.077)] = 0.0206 / (-0.0046) = -4.48 years ≈ 4.5 years (remaining time is positive)
I would say that it would be the <u>rate of return</u> but i might be wrong
The calculation of the Weighted Average Cost of Capital ( WAAC ) can be done using the following formula:
Weighted Average Cost of Capital = (Cost of debt * Weight of debt) + (Cost of Preferred* Weight of Preferred) +( Cost of equity * weight of equity)
Following information is available:
Cost of debt = 6%
Weight of debt = 40%
Cost of Preferred = 7.50%
Weight of Preferred = 15%
Cost of equity or retained earnings = 12%
Weight of equity = 45%
Hence, Weighted Average Cost of Capital = (6%*40%) + (7.5%*15%) + (12%*45%) = 8.925%
Hence, Weighted Average Cost of Capital is <u>8.925%
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