Answer:
<em>"A terrible thing happens without publicity...</em><em>nothing</em><em>!"</em>
Answer : The total bond interest expense to be recognised over the bond's life is $217,600.
We arrive at the answer as follows:
In the question above, the face value of the bond is $640,000. We <u>do not</u> consider the issue price of the bond while computing interest on the bond.
The coupon rate on the bond is 8.5%.
The bond is a four-year bond.
Substituting these values in the equation above we get,
The issue price of the bond depends on prevailing market rates (12%). Since the market interest rate is greater than the coupon rate, investors will not invest in the bond unless they also receive a return of at least 12%. So, the bond is sold at a price lesser than face value - $570,443, in order to make the bond issue attractive to the investors.
These market values are not used while computing the total interest expense on the bond.
Based on the probability distributions of the funds and the correlation, the following is true:
- Investment proportions would be 33% Equity and 67% debt.
- Standard deviation would be 21.16%.
<h3>What would be the Investment proportions?</h3>
The expected return can be found as:
= (Return on stock x Weight of stock) + (Return on debt x Weight of debt)
As we already have the return as 12%, we can solve the formula for weights :
12% = (16% x Weight of equity ) + (10% x Weight of debt)
12% = (16% x W of equity ) + (10% x (1 - W of equity))
12% = 0.16W + 10% - 0.1W
2% = 0.06W
W = 2% / 0.06
= 33%
Equity is 33% so Debt is 67%.
<h3>What would be the standard deviation?</h3>
= √(Weight of stock ² x Standard deviation of stock ² + Weight of debt ² x Standard deviation of debt² + 2 x standard deviation of stock x standard deviation of debt x Correlation x weight of stock x weight of debt )
= √(33%² x 34% ² + 67%² x 25%² + 2 x 34% x 25% x 0.11 x 0.33 x 0.67)
= 21.16%
Find out more on portfolio standard deviation at brainly.com/question/20722208.
Yield to maturity (YTM) = [(C+(F-P)/n) / ((F+P)/2)]*100
Given:
Duration/term = n = 4 year
Interest rate or coupon= 4%
Price = P = 98
To find: Yield to maturity
Face value of the bond = F = 100
So, interest/C = 4% of 100= 4
Solution:
Yield to maturity (YTM) = [(C+(F-P)/n) / ((F+P)/2)]*100
Now, putting values in the formula,
[(4+(100-98)/4) / ((100+98)/2)]*100 Answer = 4.54% is the yield to maturity
Answer:
Option (d) 7 times
Explanation:
Data provided in the question:
Net income = $250,000
Dividends paid to common stockholders = $50,000
Common stock outstanding = 50,000
Selling price of the common stocks = $35
Now,
The price-earnings ratio is calculated as:
⇒ ( Stock price ) ÷ ( Earnings per share )
also,
Earnings per share = ( Net income ) ÷ ( common stock outstanding )
= $250,000 ÷ 50,000
= $5
or
Price-earnings ratio = $35 ÷ $5
or
Price-earnings ratio = 7 times
Option (d) 7 times
