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Setler [38]
3 years ago
7

A 13-year, 6 percent coupon bond pays interest semiannually. The bond has a face value of $1,000. What is the percentage change

in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent? Select one:______
a. 1.79 percent
b. −1.79 percent
c. −1.38 percent
d. −1.64 percent
Business
1 answer:
Ierofanga [76]3 years ago
6 0

Answer:

b. −1.79 percent

Explanation:

You can solve this using a financial calculator. I'm using TI BA II plus ;

First, find Price of the bond if YTM = 5.5%. Since it is semi-annual, adjust the YTM  and total duration;

N = 13*2 = 26

I/Y = 5.5%/2 = 2.75%

PMT = (6%/2)*1000 = 30

FV = 1,000

CPT PV = $1046.01

Next, find Price of the bond if YTM = 5.7%.

N = 13*2 = 26

I/Y = 5.7%/2 = 2.85%

PMT = (6%/2)*1000 = 30

FV = 1,000

CPT PV = $1027.28

Percentage change =[ (New price- Old price)/Old price] *100

=\frac{1027.28-1046.01}{1046.01} *100\\ \\ = -0.017906 *100

= -1.79%

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6 0
3 years ago
Xavier Co. wants to purchase a machine for $37,900 with a four year life and a $1,000 salvage value. Xavier requires an 8% retur
ale4655 [162]

Answer:

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5 0
3 years ago
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andrezito [222]

Answer:

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7 0
2 years ago
Jones Mfg. has current assets of $26,900, net working capital of $8,200, long-term debt of $21,500, and total equity of $57,800.
abruzzese [7]

Answer:

A

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7 0
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