1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Dafna1 [17]
3 years ago
10

Consider three bonds with 6.8% coupon rates, all making annual coupon payments and all selling at a face value of $1,000. The sh

ort-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has maturity 30 years. a.What will be the price of each bond if their yields increase to 7.8%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) 4 Years 8 Years 30 Years Bond price$ $ $ b.What will be the price of each bond if their yields decrease to 5.8%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) 4 Years 8 Years 30 Years Bond price$ $ $
Business
1 answer:
makvit [3.9K]3 years ago
6 0

Answer:

  • a. What will be the price of each bond if their yields increase to 7.8%?

4 Years :  $966,73  (see example)

8 Years :  $942,09  

30 Years : $885,26  

  • b. What will be the price of each bond if their yields decrease to 5.8%?

4 Years :  $1,034.81 (see example)

8 Years :  $1,062.59

30 Years : $1,140.64

Explanation:

Principal Present Value  =  F /  (1 + r)^t      

Coupon Present Value   =  C x [1 - 1/(1 +r)^t] / r      

This is an example for 4 years, 7,8%, to the others years only change "t".

The price of this bond it's $740,50 + $226,23 = $966,73      

Present Value of Bonds $740,50 = $1,000/(1+0,0780)^4        

Present Value of Coupons $226,23 =  $68 (Coupon) x 3,33      

3,33 =   [1 - 1/(1+0,0780)^4 ]/ 0,0780      

This is an example for 4 years, 5,8%, to the others years only change "t".

The price of this bond it's $798,10 + $236,71 = $1,034.81      

Present Value of Bonds $798,10 = $1,000/(1+0,0580)^4        

Present Value of Coupons $236,71 =  $68 (Coupon) x 3,48      

3,48 =   [1 - 1/(1+0,0580)^4 ]/ 0,0580      

You might be interested in
Economists define "programmed spending behavior" as being spending that is frequent and is done with relatively little thought.
Alexandra [31]

Answer: D) buying coffee in the morning

3 0
3 years ago
Read 2 more answers
New issues of municipal short term notes are available in which form?
igomit [66]

Answer: book entry

Explanation:

A municipal bond, which is commonly referred to as a muni bond, can be defined as a bond that is issued by a particular territory or local government in order to finance public projects like airports, schools, roads, museums, seaports, and infrastructure. It should be noted that new issues of municipal short term notes are available in book entry form.

7 0
3 years ago
A total of 1000 residents in minnesota were asked which season they preferred
Molodets [167]
They all said winter.
Hope this helps!
7 0
3 years ago
Which of the following is not one of the guiding questions to creating a Strategic Business Plan?
inysia [295]
What do we want is the answer I believe, correct me if I’m wrong
7 0
3 years ago
Flagstaff Company has budgeted production units of 8,000 for July and 8,200 for August. The direct materials requirement per uni
Nezavi [6.7K]

Answer:B) $28,980.

Explanation:

Beginning inventory is 6,000 ounces

Closing inventory  = 8,200 × 3 ounces × 25%   = 6,150ounces

 Budgeted production  = 8,000 × 3 ounces=24,000

Direct material to be purchased  = Closing inventory + Budgeted production - Beginning inventory= 29,400 ounces

Direct material to be purchased  = 6,150ounces +24,000-  6,000 ounces

= 24,150 ounces

Now,For $1.20 per pounce, it would be

= 24,150 ounces × $1.20

= $28,980.

4 0
2 years ago
Other questions:
  • Frodic Corporation has budgeted sales and production over the next quarter as follows: July August September Sales in units 40,0
    6·1 answer
  • The Eagle Pawn Company is a regional business that owns seven pawn stores in the Houston area. The owners of Eagle Pawn have rec
    14·1 answer
  • Domain names that end in .edu are:
    7·1 answer
  • To fund operations so far bill has taken out a second mortgage on his personal residence for $70,000 and deposited the full amou
    13·1 answer
  • If a manufacturing plant that employs 20% of the local labor force closes, the likely effect on the area’s real estate values
    7·1 answer
  • 2. QuickDraw performs drafting services for local builders. At the end of its first year of operations, QuickDraw had performed
    15·1 answer
  • You manage a popular nightclub, and lately revenues have been disappointing Your bouncer suggests that raising drink prices will
    13·1 answer
  • Pls hurry ________structures are laid-back and undefined.
    12·2 answers
  • You are considering investing $6,789 at an interest rate of 7.345% compounded annually for 15 years or investing $6,789 at an in
    9·1 answer
  • Drag the tiles to the correct boxes to complete the pairs.
    7·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!