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My name is Ann [436]

3 years ago

14

Suppose a negative externality exists in a market. if transactions costs are low and parties are willing to bargain then, accord

ing to the coase theorem

1 answer:

soldier1979 [14.2K]3 years ago

3 0

Under these conditions an efficient solution can be reached regardless of the initial assignment of property rights.

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You bought one of Lambert Sandblasting Company's 15-year bonds one year ago for $960. These bonds pay 7 percent annually, have a

maksim [4K]

Answer:

Real return on investment: 22.9465%

Explanation:

Okay let's explain each concept we have given:

<em>Face Value</em> $1,000

This is the ammount Lambert will pay at maturity

Purchase Value $ 960

This is the Ammount we pay for the bond

<em>Market Value of the bond today $ ???</em>

This is what we need to determinate to see the return we got

Once we got the market Value we will do:

Market Value / Purchase Value - 1 = rate of return

Now the <em>market value today will be the present value of the bond,</em> and the bond has the following data:

Mature in 14 year

bond rate 7% annualy.

So each year we receive the 7% of the face value ($1,000) = $70

And at the end of the bond life we receive 1,000

We need to bring this numbers at present day using the real market rate, because the economy is having inflation:

market rate 8%

inflation rate 2.7%

real rate:

(1+rate)/(1+inflation) -1 = real rate

$\frac{1.08}{1.027} -1 = real rate$

real rate = 5.16%

To know the present value of the bond we will have to consider:

present value of an annuity of 70$ during 14 year at a rate of 5.16% =
present value of the 1,000 that will be pay at maturity at a rate of 5.16%

<em>The annuity will be </em>

$70 * \frac{1-(1+0.0516)^-14}{0.0516} = 685.87$

$C * \frac{1-(1+rate)^-time}{rate} = present value$

$685,87

<em>The present value of the 1,000 will be</em>

face value/(1+rate)^time

1,000/(1+0.0516)^14 = $494,42

for a total of $1.180,29

Now we will calculate the real return on the investment:

we receive 1.180,29 for 960 so the rate is

1.180,29 /960 - 1 = 0.229465 = 22.9465%

8 0

3 years ago

The yield to maturity on a bond is:

Arada [10]

Answer:

The correct answer is I, II and III.

Explanation:

The return that an investor earns with a bond can be calculated in different ways. The price of the bonds fluctuates with the change in interest rates, but once the investor buys a bond, the return is fixed. The yield to maturity is a way of providing the investor with the most accurate representation of the return he will receive for the holding of said bond.

Types of bond yield

Based on the current price, a bond shows three different types of maturity. The yield of the coupon is the interest rate paid by the bond at face value. A US $ 10,000 bond with a 6 percent interest coupon pays US $ 300 interest every 6 months. The current return is the coupon rate divided by the bonus price. If the bond with a nominal value of US $ 10,000 and a 6 percent coupon rate can be purchased for US $ 9,600, its current yield is 6.25 percent. The yield at maturity is the internal rate of return of the bond based on the time remaining for the bond's maturity.

Expiration Yield

The calculation of the yield at maturity amortizes the value of the premium or the discount (bonds over and under the pair) in the price of the bond throughout the life of the bond. For example, if the bond that pays 6 percent of the aforementioned coupon rate expires in 10 years, and is priced at US $ 9,600, the yield at maturity is 6,558 percent. If two bonds, one on the pair and one under the pair, have the same yield at maturity, any of them represents the same level of return for the investor. The yield at maturity is what the investor will receive if the bond is purchased at the current market price and held until maturity.

4 0

3 years ago

*E21.23 (LO 5) (Sale-Leaseback) Assume that on January 1, 2020, Elmer's Restaurants sells a computer system to Liquidity Finance

Dennis_Churaev [7]

<u>Solution and Explanation:</u>

Date General Journal Debit Credit

January 1, 2017 Cash/Liquidity Finance Co. 680000

Computer system 600000

Profit on sale of computer system 80000

To record the sale of computer systems

January 1, 2017 Lease Rental 115970

Cash 115970

To record the first lease rental of the lease Journal entries in the books of lesser(Liquidity Finance Co.)

Amount in $

Date General Journal Debit Credit

January 1, 2017 Computer system 680000

Cash/Elmer's Restaurants 680000

To record the purchase of computer systems

January 1, 2017 Cash 115970

Lease Rental Income 115970

To record the first receipt towards lease rental of the lease

December 31, 2017 Depreication on computer system 68000

Accumulated depreication on computer system 68000

To record the depreication expense for the year

5 0

3 years ago

You are employing two dish washers at $12 per hour with each working 10 hours per week.You learn about a new automatic dishwashi

Arisa [49]

120 per week, per dish washer
240 per week for employed dishwashers
3,000/240
12.5 weeks

4 0

3 years ago

Read 2 more answers

In operations management, _____ means using resources to create value by providing customers with goods and services that offer

Bess [88]

<span>Operational management manages activities that are involved in creating value by producing goods and services and distributing them to customers.
</span>Effectiveness is a term used in operational management to describe using resources to create value by providing customers with goods and services that offer a better relationship between price and perceived benefits.

6 0

3 years ago