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gavmur [86]
3 years ago
15

A U.S. treasury bond (selling at a par value of $1,000) that matures at the end of five years is said to have a coupon rate of 6

% if, after paying $1,000, the purchaser receives $30 at the end of each of the following nine six-month periods and then receives $1,030 at the end of the the tenth period. That is, the bond pays a simple interest rate of 3% per six-month period, with the principal repaid at the end of five years. Assuming a continuously compounded interest rate of 5%, find the present value of such a stream of cash payments.
Business
1 answer:
pav-90 [236]3 years ago
7 0

Answer:

$1,042.04

Explanation:

to calculate the present value using a continuously compounded interest rate, we can use the following 2 formulas:

1) present value = cash flow / eⁿˣ

  • e = 2.71828
  • x = 5% / 2 = 2.5%
  • n = 10
  • cash flow = $1,030

present value = $1,030 / 2.71828¹⁰ˣ⁰°⁰²⁵ = $1,030 / 1.284 = $802.16

2) present value of an annuity = payment [(1 - e⁻ⁿˣ) / (eˣ - 1)]

  • payment = $30
  • x = 2.5%
  • n = 9
  • e = 2.71828

present value = $30 [(1 - 2.71828⁻⁹ˣ⁰°⁰²⁵) / (2.71828⁰°⁰²⁵ - 1)] = $30 [(1 - 2.71828⁻⁹ˣ⁰°⁰²⁵) / (2.71828⁰°⁰²⁵ - 1)] = $30(0.2015 / 0.0252) = $239.88

present value of the stream of cash flows = $802.16 + $239.88 = $1,042.04

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Demand for a certain product is forecast to be 800 units per month, averaged over all 12 months of the year. The product follows
laiz [17]

Answer:

Demand in January will be 640 units

So option (C) will be the correct option

Explanation:

We have given average demand for a particular product is 800 units

And seasonal index = 0.8

We have to find the demand in a particular session , that is in January

We know that seasonal index is given by

Seasonal\ index=\frac{demand\ in\ a\ particular\ season}{average\ demand}

So 0.8=\frac{demand\ in\ January}{800}

So demand in January = 640

So option (c) will be the correct option

8 0
3 years ago
Accounting professors earn more than English professors at most universities. Explain this with a supply and demand graph.
GenaCL600 [577]
I will assume here (since I don't have more information) that each school needs one English and one Accounting professor, but that more people are ready to teach English than accounting (this assumption might be wrong, but it's what  think)

therefore the supply is bigger for the English professors than for the Accounting professors -this means that the accounting professors can ask for bigger salary (the bigger the supply, the smaller the prize)

3 0
3 years ago
Consider the following projects. Project CO C1 C2 СЗ C4 C5 A -1,000 +1,000 0 0 0 10 B -2,000 |+1,000 |+1,000 +4,000 +1,000 +1,00
Nuetrik [128]

Answer:

a) $3,458

Explanation:

The net present value is the present value of future cash flows discounted at the firm's weighted average cost of capital(which is the appropriate discount rate in this case) minus the initial investment outlay

cost of equity=risk-free rate+beta*(expected market return-risk free rate)

cost of equity=2.5%+1.5*(12%-2.5%)

cost of equity=16.75%

after-tax cost of debt=5.2%*(1-21%)

after-tax cost of debt=4.11%

WACC=(weight of equity*cost of equity)+(weight of debt*after-tax cost of debt)

weight of equity=value of equity/(value of equity+value of debt)

value of equity=6 billion*$3=$18 billion

value of debt=$5 billion

weight of equity=$18 billion/($18 billion+$5 billion)

weight of equity=78.26%

weight of debt=1-78.26%

weight of debt=21.74%

WACC=(78.26%*16.75%)+(21.74%*4.11%)

WACC=14.00%

present value of a future cash flow=future cash flow/(1+WACC)^n

n is the year in which the cash flow is expected, it is 1 for year 1 cash flow, 2 for year 2 cash flow ,and so on

NPV of project B=1000/(1+14%)^1+1000/(1+14%)^2++4000/(1+14%)^3+1000/(1+14%)^4+1000/(1+14%)^5-2000

NPV of project B=$ 3,458.00  

5 0
2 years ago
What payroll deductions might change depending on the state you live in
Blizzard [7]
State and local taxes
6 0
3 years ago
Anthony Finley wishes to become a millionaire. His money market fund has a balance of $287,270 and has a guaranteed interest rat
mrs_skeptik [129]

Answer:

15 years

Explanation:

The target accumulated future amount is the future value of the initial investment(present value), hence, using the future value formula provided below we can determine the investment time horizon in years required to accumulate the target amount:

FV=PV*(1+r)^n

FV=$1,200,000

PV=$287,270

r=10%

n=investment period in years=unknown

$1,200,000=$287,270*(1+10%)^n

$1,200,000/$287,270=(1+10%)^n

$1,200,000/$287,270=(1.10)^n

take log of both sides

ln($1,200,000/$287,270)=n ln(1.10)

n=ln($1,200,000/$287,270)/ln(1.10)

n=15.00years

4 0
2 years ago
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