A joint-stock company is one that

Bond X and bond Y both are issued by the same company. Each of the bonds has a maturity value of $100,000 and each matures in 10

Alex17521 [72]

Answer:

d. Bond Y sells for more than bond X

Here is the question in proper order:

Bond X and bond Y both are issued by the same company. Each of the bonds has a maturity value of $100,000 and each matures in 10 years. Bond X pays 8% interest while bond Y pays 9% interest. The current market rate of interest is 8%. Which of the following is correct?

a. Bond X sells for more than bond Y.

b. Both bonds sell at a discount.

c. Both bonds sell for the same amount.

d. Bond Y sells for more than bond X

Explanation:

Bond price is calculated using the relation

$Bond Price = C * \frac{[1 - \frac{1}{(1 + r)^{2} } ]}{[r + \frac{M}{(1+r)^{2} } ]}$

where

C = coupon amount

r = current market rate of interest

n = no of years

M = face value (amount)

Now for bond X

C = $100,000 x 8% = $8,000

r = 8% or 0.08

n = 10 years

M = face value

substituting in the equation

$Bond price = 8000 * \frac{[1 - \frac{1}{(1+0.08)^{10} } ]}{[0.08 + \frac{100000}{(1+0.08)^{10} } ]}$

=8,000 x [1-{1/(1.08)10/0.08 +100,000/(1.08)10

=8,000 x [1-{1/2.158925]0.08 +100,000/2.158925

=8,000 x [1-0.463193]0.08 + 46,319.35

=8,000 x [0.5368065]0.08 +46,319.35

=8,000 x 6.7100814 +46,319.35

= 53,680.65 +46,319.35

=$100,000

Bond price = $100,000

For bond Y

only C is different and C = $9000

$Bond price = 9000 * \frac{[1 - \frac{1}{(1+0.08)^{10} } ]}{[0.08 + \frac{100000}{(1+0.08)^{10} } ]}$

= 9,000 x [1-{1/(1+0.08)10}]/0.08 + 100,000/(1+0.08)10

=9,000 x [1-{1/(1.08)10/0.08 +100,000/(1.08)10

=9,000 x [1-{1/2.158925]0.08 +100,000/2.158925

=9,000 x [1-0.463193]0.08 + 46,319.35

=9,000 x [0.5368065]0.08 +46,319.35

=9,000 x 6.7100814 +46,319.35

= 60,390.73 +46,319.35

=$ 106,710.08

3 0

3 years ago

Help me please!!!!!!!

erica [24]

Answer: uh...

Explanation:

Sorry, please show me what you need help with so I can help you. Thankyou!

5 0

3 years ago

Can a Marginal cost curve NOT be U shaped?

pogonyaev

Answer:

The marginal cost curve is usually U-shaped. Marginal cost is relatively high at small quantities of output; then as production increases, marginal cost declines, reaches a minimum value, then rises.

Explanation:

N/A

8 0

2 years ago

Value Added Inc. buys $1 million of sow’s ears at the beginning of January but doesn’t pay immediately. Instead, it agrees to pa

mamaluj [8]

Answer:

a. What is the firm’s net income in February?

net income = revenue - costs = $2,000,000 - $1,000,000 (only cost given) = $1,000,000

b. What is its net income in March?

$0, the company didn't sell anything during March

c. What is the firm’s net new investment in working capital in January?

net working capital = current assets - current liabilities = $1,000,000 (inventory) - $1,000,000 (accounts payable) = $0

d. What is its net new investment in working capital in April?

net working capital = current assets - current liabilities = $0

It changed accounts receivables for cash, they are both current assets.

e. What is the firm’s cash flow in January?

$0, it didn't pay anything during January

f. What is the firm’s cash flow in February?

$0, it didn't pay anything during February

g. What is the cash flow in March?

-$1,000,000 since it paid its accounts payable during March

h. What is the cash flow in April?

$2,000,000 since it collected its accounts receivables during April

6 0

3 years ago

A $1,000 bond matures in 15 years and carries a 5 percent coupon. The bond is callable in 5 years at a premium equal to one year

masha68 [24]

Answer:

The formula is

Price of the bond = [ $25 x ( 1 - ( 1 + 2.35% )^-30 )/ 2.35% ] + [ $1,000 / ( 1 + 2.35% )^30 ]

Explanation:

To calculate the price of the bond, use the following formula

Price of the bond = [ Coupon payment x ( 1 - ( 1 + Semiannual market rate )^-numbers od periods )/ Semiannual market rate ] + [ Face value / ( 1 + Semiannual market rate )^numbers of periods ]

Where

Coupon payment = $1,000 x 5% x 6/12 = $25

Semiannual market rate = 4.7% x 6/12 = 2.35%

Numbers of periods = 15 years x 12/6 = 30

Face value = $1,000

Placing values in the formula

Price of the bond = [ $25 x ( 1 - ( 1 + 2.35% )^-30 )/ 2.35% ] + [ $1,000 / ( 1 + 2.35% )^30 ]

6 0

3 years ago