Mette Badminton Equipment Co. wants to raise $7 million to expand operations. To accomplish this, it plans to issue 20-year bond
s with a face value of $1,000. The coupon rate is set at 9% and the couponds will be paid semi-annually. The bonds are priced at a yield-to-maturity of 10%. What is the minimum number of bonds the firm must sell to raise the $7 million
1 answer:
Answer:
7,657 bonds
Explanation:
In order to determine the minimum number of bonds first we have to find out the present value of the bond which is to be shown in the attached spreadsheet.
Data provided in the question
Future value or Face value = $1,000
PMT = $1,000 × 9% ÷ 2 = $45
Rate of interest = 10% ÷ 2 = 5%
NPER = 20 years × 2 = 40 years
The formula is shown below:
= PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value of the bond is $914.20
Now the raise amount is $7 million
So, the number of minimum number of bonds is
= $7,000,000 ÷ $914.20
= 7,657 bonds
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Answer:
option B
Explanation:
In other to know how return fluctuation can be predicted with for instance, x%, predictability, one has to look at the normal distribution curve of return (average returns) to standard deviation of those returns. (check the attached file for additional details).
Hence, to be 95% sure that investment losses are less than 8% one needs to look at 95% of all returns which infact Mean return plos or minus 20. If the lower bound of this interval is less than 8% then the investment needs to be selected
check attached file for additional details
