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vovangra [49]
4 years ago
5

Mary purchased a 10-year par value bond with semiannual coupons at a nominal annual rate of 4% convertible semiannually at a pri

ce of 1021.50. The bond can be called at par value 1100 on any coupon date starting at the end of year 5. What is the minimum yield that Mary could receive, expressed as a nominal annual rate of interest convertible semiannually?
Business
1 answer:
Ivan4 years ago
5 0

Answer: 0.05628 = 5.628%

The minimum yield that Mary could receive is 5.628%

Explanation:

Using the YTM (yield to maturity) formula

YTM = C + (f - p) /n ÷ (f+p) /2

C = coupon rate ; 4% of 1,100(par value) = 4/100 × 1,100 = 44

f = face value ( par value) = 1,100

P = market price = 1021.50

n = number of years = (10 - 5)= 5years : since the bond could be called at the end of 5 years.

YTM = 44 + (1,100 - 1,021.50)/5 ÷ (1,100+1,021.50)/2

YTM = 44 + ( 78.5)/5 ÷ 2121.5/2

YTM = 59.7/1,060.75

YTM = 0.05628

= 5.628% as the minimum yield Mary could receive.

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5 0
4 years ago
Match the following terms to the correct definition. The maximum expected output capability of a resource or system. An approach
tamaranim1 [39]

Answer:

The maximum expected output capability of a resource or system. - Is the definition of <u>Design Capacity.</u>

An approach to a firm's acquisition of resources that will either lead, lag, or track the customer demand. - Is the definition of <u>Capacity Expansion Strategy.</u>

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5 0
3 years ago
The Colson Company issued $407,000 of 9% bonds on January 1, 2014. The bonds are due January 1, 2020, with interest payable each
Zielflug [23.3K]

Answer:

Dr cash    $407,000

Cr bonds payable       $407,000

July 1

Dr interest expense   $ 18,315.00  

Cr cash                                              $ 18,315.00  

December 31

Dr interest expense   $ 18,315.00  

Cr interest payable                                          $ 18,315.00  

Explanation:

The bond was issued at face value of $407,000 which means that cash of $407,000 was received which is to be debited to cash account and bonds payable account credited for the same amount.

On July1 ,interest coupon of  $ 18,315.00   ($407,000*8%*6/12) was paid which means that interest expense is debited with $ 18,315.00   while cash is credited.

On 31 December ,interest coupon of  $ 18,315.00   ($407,000*8%*6/12) was due  which means that interest expense is debited with $ 18,315.00   while interest payable is credited.

6 0
3 years ago
Suzi owns 100 shares of AB stock. She expects to receive a $238 in dividends next year. She also expects the stock to sell for $
lesya692 [45]

Answer: $42.63

Explanation:

To calculate this we will add the present value of Future cash flows (dividends) to the present value of the stock.

Dividend per share one year from now is,

= 238/100

= $2.38

Stock Price a year from now = $46

Discount rate is $13.5%

PV of sum = 2.38/(1+0.135) + 46/ (1 + 0.135)

= 42.6255506608

= 42.63

$42.63 is the Intrinsic value of the stock.

If you need any clarification do react or comment.

8 0
3 years ago
"Profit plays an important role in the business." In the light of this statement,
inessss [21]

Answer:

to secure financing from a bank

to attract investors to fund its operations

to grow the business itself

Explanation:

4 0
3 years ago
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