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AysviL [449]
2 years ago
9

LRQ Inc. issued bonds on April 18, 2006. The bonds had a coupon rate of 5.5%, with interest paid semiannually. The face value of

the bonds is $1,000 and the bonds mature on April 18, 2036. What is the intrinsic value of an LRQ Corporation bond today (April 18, 2020) to an investor with a required return of 7%?
Business
1 answer:
ankoles [38]2 years ago
8 0

Answer:

$857

Explanation:

Price of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Both of these cash flows discounted and added to calculate the value of the bond.

According to given data

Face value of the bond is $1,000

Coupon payment = C = $1,000 x 5.5% = $55 annually = $27.5 semiannually

Number of periods = n = (April 18, 2036 - April 18, 2020) years x 2 = 16 x 2 period = 32 periods

Market Rate = 7% annually = 3.5% semiannually

Price of the bond is calculated by following formula:

Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]

Price of the Bond = 27.5 x [ ( 1 - ( 1 + 3.5% )^-32 ) / 3.5% ] + [ $1,000 / ( 1 + 3.5% )^32 ]

Price of the Bond = $524.29 + $332.59 = $856.98 = $857

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Moerdyk Corporation’s bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The going interest ra
azamat

Answer:

The price of the bonds is $ 1,276.

Explanation:

The value of bond or issue price can be calculated by discounting all future cash flow using effective rate of retun. Detail calculations are given below.

Future Value = Redemption present value (RPV) + Present value of interest   (PVI)

RPV = 1,000 (1+5%)^-15 = $ 481 -A

PVI = 36.25 * Annuity factor  =$ 759 -B

Future Value = A + B = $ 1,276  

Annuity factor = (1- (1+i%)^-n)/i% = (1- (1+5%/2)^-30)/(5%/2) = 20.9303

7 0
3 years ago
Advantages and disadvantages of implementing plan where functional managers will be held responsible for cost overruns against t
Morgarella [4.7K]

Answer:

Kindly check explanation

Explanation:

Implementing plans where functional managers will be held responsible for cost overruns against their original estimate possess both advantages and disadvantages :

The advantages include:

1) Efficient use of Resources : A functional manager could be explained as the head or a person who has managerial authority over a department within a business organization. As such the functional manager will be able to monitor more effectively and take control of his unit. Holding them responsible for cost overruns will ensure that they are more cautious when it comes to resource and cost management as they will not want to be sanctioned.

11) ACCOUNTABILITY: It increases the sense of responsibility of the functional managers as they are being held fully responsible for the decisions made within their unit. This places a higher burden of showing sincerity on the managers.

The disadvantage associated with the plan is the possibility of producing low quality products resulting from the economical and cautious approach embarked upon in other to prevent cost overrun, materials used may be lesser quality than expected.

5 0
3 years ago
In the securitization process, mortgages are pooled together and cash flows are packaged into securities to be sold in the secon
Viefleur [7K]

Answer:

conduits

Explanation:

A mortgage-backed security is one in which is similar to bonds but that usually consists of home loans ought from banks that issued them. It is a type asset-backed security which can be sold through brokers.

investment in mortgage-backed assets means the investor is lending out his money to people that intend to get a home.

A mortgage-backed security can be bought directly from banks or through brokers. These brokers are also called conduits.

Cheers

7 0
3 years ago
A turnkey project includes Multiple Choice government investment. construction up to but not including actual production. direct
Tema [17]

A turnkey project includes construction up to but not including actual production. Option B. This is further explained below.

<h3>What is construction?</h3>

Generally, construction is simply defined as the process of erecting a building.

In conclusion, The building process, but not the manufacturing itself, is included in a turnkey project.

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3 0
2 years ago
The debt owed by a business to an outside individual or organization is called its?
worty [1.4K]

The debt owed by a business is called liabilities. Liabilities are obligation that a person or business has, typically financial in nature. Over time, liabilities are resolved by the transmission of economic advantages like  products, services.

Liabilities on balance sheet's right side are represented by debts like as loans, accounts payable, mortgages, deferred revenue, bonds, warranties etc. Assets can be contrasted with liabilities. Assets are items business own or owe money to, whereas liabilities are debts or other obligations.

Short-term financial commitments of a business that are due in a year or within its typical operational cycle are known as current liabilities.

To learn more about  liabilities, click here

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7 0
1 year ago
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