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Darya [45]
3 years ago
15

Answer the question on the basis of the following information for a bond having no expiration date: bond price = $1,000; bond fi

xed annual interest payment = $100; bond annual interest rate = 10 percent.
Refer to the given information. If the price of this bond increases to $1,250, the interest rate will:
a) fall to 9 percent.
b) fall to 8 percent.
c) rise to 11 percent.
d) rise to 12 percent.
Business
1 answer:
Olin [163]3 years ago
7 0

Answer:

b) fall to 8 percent.

Explanation:

First, irrespective of the duration of the bond, if the price is equal to the bond's face value, it means that the coupon rate is equal to the yield to maturity (YTM).

Initial YTM = 10%

Since this is a perpetually coupon paying bond, you use PV of perpetuity  to find the rate;

PV = Coupon PMT / rate

Given PV as $1,250, new annual rate would be;

1,250 = 100/rate

solve for rate by cross multiplying;

1,250rate = 100

divide both sides by 1,250

rate = 100/1,250

rate = 0.08 or 8%

Therefore, the

interest rate would fall to 8 percent.

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In July 2012, a small chocolate factory receives a large order for chocolate bars to be delivered in November. The spot price fo
Anettt [7]

Answer:

$24,530, $23,530

Explanation:

Incomplete word <em>"and if the spot price in September proves to be $2,300."</em>

<em />

Note that Call options will be exercised only if the price on expiry is greater than strike price

Strike price = $2400

Premium paid = $53 for each contract, so the total premium paid = $530 for 10 contracts

<u>CASE 1</u>

Price = $2600

As price on expiry=2600 > Strike price=2400

Call option will be exercised.

Company will pay = $2400 * 10+530 = $24,530

<u>CASE 2</u>

Price = $2300

As price on expiry=2300 < Strike price=2400

Call option will not be exercised and will purchase from open market

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4 0
3 years ago
Suppose only two countries existed in the world. Country A imported $200 million worth of goods and services from Country B. Cou
tigry1 [53]

Answer:

C. Country A equals –$100 million.

Explanation:

Imports from Country B to Country A = $200 million

Imports from Country A to Country B = $100 million

Imports for one country represents exports to another.

Net exports is the difference between exports and import for a country.

Net exports for country A = $100 million - $200 million = - $100 million

Net exports for country B = $200 million - $100 million = $100 million

Right option is C. Country A equals –$100 million. Country's A export is less than it's import.

6 0
3 years ago
Within his company, Vernon has set up a system with inputs, outputs, transformation processes, and feedback. He utilizes a manag
Ray Of Light [21]

Answer: (B) Contemporary

Explanation:

 The contemporary perspective is basically focuses on the behavior of the individual people that are acquired and also modify by the change in the environmental consequences.

The contemporary perspective is one of the type of modern psychology that helps in determine the actual behavior and also the pint of view of the people.

According to the given question, the Vernon set up the system in his company with outputs, feedback, inputs and also the transformation process and he basically managing all the stages of the production.

Therefore, Vernon is basically utilizing a contemporary perspective.  

5 0
3 years ago
Today you purchase a $600 face-value, 8% coupon bond for $600. This bond matures over 10 years. What is the value of the cash fl
Nadya [2.5K]

Answer:

the value of the cash flow in year 5 is -$48

Explanation:

Cash flow in year 5 include a capital repayment and interest expense.This can be determined by constructing an amortization schedule from the data given.

The first step in constructing the amortization schedule is to find the Yield to Maturity.

Pv = -$600

Pmt = $600 × 8% = $48

P/yr = 1

N = 10

Fv = $600

YTM = ?

Using a Financial Calculator the Yield to Maturity is 8%.

then to determine the cash flow for year 5, we need the coupon amount (interest) and the amount of capital repayment.

Coupon  $48

Capital     $0

Total       $48

Therefore the cash flow in year 5 is -$48.

8 0
3 years ago
What is a production possibility curve
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Hey I think A production–possibility frontier or production possibility curve is a curve which shows various combinations of set of two goods which can be produced with the given resources and technology where the given resources are fully and efficiently utilised per unit time
8 0
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