The true rate of interest that you pay on a loan is called the

a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rati

VikaD [51]

Answer and Explanation:

a. The computation of price (expressed as a percentage of the face value) is shown below:-

Price = Face value ÷ (1 + Yield to maturity)^Number of the compounding period

= $1,000 ÷ (1 + 0.0323)^1

= $1,000 ÷ 1.0323

= $968.71

Price expected as a percentage to a face value = Price ÷ Face value × 100

= $968.71 ÷ $1,000 × 100

= 96.87%

b. The computation of credit spread of AAA-rated corporate bonds is shown below:-

Credit spread = Yield of AAA-rated corporate bond - Yield of treasury bond

= 3.23% - 3.15%

= 0.08%

c. The computation of credit spread on B-rated corporate bonds is shown below:-

Credit spread = Yield of B-rated corporate bond - Yeld of treasury bond

= 4.94% - 3.15%

= 1.79%

d. The credit rating for a bond changes with its respective credit risk change. That implies the bond 's rating would be lower the lower risk, and likewise.

The investor is demanding higher returns on risky bonds for additional risk-taking. Hence the credit spread is widening as the rating of bonds falls with an increase in the risk.

8 0

3 years ago

A couple decides that Sophia will drive the first 3/5 of a trip and Toby the last 2/5. The entire trip is 500 miles long. How fa

alexandr1967 [171]

Sophia will drive 300 miles :) 3/5 of 500 3/5 of 5, 3 so 300 ig

6 0

2 years ago

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is r s

taurus [48]

The stock's current price is $18.29.

<h3>What is Stock Valuation?</h3>

The price of the stock is determined by demand and supply. The price of the stock is also linked with the fundamentals of the company. To determine its intrinsic value the future cash difference is discounted.

Solution-

Stock's current price = Dividend

Required rate of return -Growth rate

Stock's current price = $0.75

10.5 % - 6.4%

Stock's current price = $0.75

4.1%

Stock's current price = $0.75

0.041

Stock's current price = $18.29

Your question is incomplete, but most probably your full question was:

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is Rs = 10.5%, and the expected constant growth rate is g = 6.4%.

Required: What is the stock's current price?

Learn more about Stock's Current Price on:

brainly.com/question/17159463

#SPJ4

6 0

1 year ago

Canyon Tours showed the following components of working capital last year: Beginning of YearEnd of Year Accounts receivable$ 25,

Scilla [17]

Answer:

a. - $3,200

b. $15,200

Explanation:

The computation of the working capital for both the years is shown below:

Beginning of Year

= Accounts receivable + inventory - accounts payable

= $25,400 + $12,700 - $15,200

= $22,900

End of year

= Accounts receivable + inventory - accounts payable

= $23,700 + $13,900 - $17,900

= $19,700

So, the change in net working capital

= $22,900 - $19,700

= - $3,200

b. The computation of the cash flow for the year is shown below:

= Sales - costs - change in working capital

= $36,700 - $24,700 - (-$3,200)

= $15,200

4 0

3 years ago

You have a $7,000 balance on your car loan at 11% interest. Your favorite aunt has just left you $10,000 in her will. You dec

evablogger [386]

Answer:

It would be wise to invest in an Annuity with monthly payment of $350.

Explanation:

You no longer have a $350 per month car payment; and you used to live well without this $350. So it's the best to use this $350 for an invesment.

Annuity is a financial reserved for retirement. Assuming you will be retired in 10 years. Then you invest in an annuity now with:

current rate: 6% ~ monthly rate 0.5%,

Monthly payment of $350 (PMT)

Tenor: 10 years (NPer = 120)

you will have a future value in 10 years as below:

In excel, FV(rate,Nper,PMT) = FV(0.5%,120.350) = $57,538

Then when you're retired, you invest full $57,538 in an retirement annuity to receive a monthly amount for living expenses. Assuming the key factors as below:

Monthly rate: 0.5%

Tenor: 25 years ~ 300 months

PV: $57,538

The monthly amount to be received is PMT(rate,Nper,PV)= PMT(0.5%.300,$57,538) = $370

You will receive about $370 for 25 years in every month of 25 years in retirement.

7 0

3 years ago