The following information related to inventory for Shoeless Joe Inc.
1 answer:
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Answer:
a. The answer is: $1,008.40
b. The bond's YTM is 3.343%
c. The current yield is 3.826%
Explanation:
a. Bond price formula: ∑(C* / (1+YTM) )
The price of the bond Intro A with i=1,2...10 is:
∑($1,000 x 3.4% / (1 + 3.3%) ) = $1,008.40
b. The price of the corporate bond which has 22 years to maturity is: $1,202.20
Given that the bond is trading at par value, the bond's YTM is:
[Annual Interest Payment + ((Face Value – Current Price) / (Years to Maturity))] / ( ( Face Value + Current Price ) / 2 )
= [$1,000 x 4.6% + (($1,000 - $1,202.20) / 22)] / (($1,000 + $1,202.20) /2)
= 3.343%
c. The bond's current yield is:
Annual Interest Payment / Current Price = $46 / $1,202.2 = 3.826%
<u>Measures of dispersion are often used in finance as a proxy for risk:</u>
Measures of dispersion are generally used to describe the variability in sample. The three commonly used measures of dispersion are as follows,
- Interquartile range - Difference between the
and
percentile (also known as the
and
quartile). The formula is
- Range - Difference between the largest and smallest observation. The formula is
- Standard deviation - SD is the square root of sum of squared deviation from the mean divided by the number of observations. The formula is as follows,
Appropriate usage of measures of dispersion:
Median and interquartile range is used for skewed numerical data, ordinal data or mean. When mean is utilized as a measure of central tendency or symmetric numerical data, SD is used.
Usage in finance:
In finance, the Regression analysis technique helps in explaining the dispersion of dependent variable, that is measured by its variance, with the help of one or more independent variables each of which has positive dispersion. This proves to be a proxy for risk.