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postnew [5]
3 years ago
12

A $7,500 face value, 20-year bond has a nominal annual coupon rate of 7.4%, paid semiannually. The yield to maturity is 5.3% con

vertible semiannually. In the 4th coupon payment, the amount for amortization of premium is $28.31. Find the redemption amount of the bond.
Business
1 answer:
Stolb23 [73]3 years ago
3 0

Answer:

$134,000

Explanation:

Annual yield (%) = Face value - Purchase value/Face value X 360 X 100%/Maturiy(in days)

Let x be purchase value

2 X 5.3% = $7,500 - x/$7,500 X 360 X 100%/365

100($7,500 - x) = 10.6 X $7,500

$750,000 - 100x = $79,500

100x = $(750,000 - 79,500) = $670,500

x = $6,750

The value of bond for 20-year: 20 X $6,750 = $134,000

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It should be noted that the gainsharing compensation plan refers to a compensation plan that is used to increase profitability as employees share in the company's gain. Since the workers share 75% of the cost savings, this is a gain-sharing compensation plan.

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3 years ago
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Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20 per pound and costs $15.75
Vedmedyk [2.9K]

Answer:

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