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Scorpion4ik [409]
3 years ago
5

Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 parvalue bonds have a quoted annual interest rat

e of 11 percent and the interest is paidsemiannually. The yield to maturity on the bonds is 14 percent annual interest. There areseven years to maturity. Compute the price of the bonds based on semiannual analysis.
Business
1 answer:
gulaghasi [49]3 years ago
8 0

Answer:

Price of the Bond is $868.82

Explanation:

Market Value of the bond is the present value of all cash flows of the bond. These cash flows include the coupon payment and the maturity payment of the bond. Price of the bond is calculated by following formula:

Market Value of the Bond = C/2 x [ ( 1 - ( 1 + r/2 )^-2n ) / r/2 ] + [ $1,000 / ( 1 + r/2 )^2n ]

Whereas

C = coupon payment = $110.00 (Par Value x Coupon Rate)

n = number of years = 7

r = market rate, or required yield = 14% = 0.14

P = value at maturity, or par value = $1,000

Price Value of the Bond = $110/2 x [ ( 1 - ( 1 + 14%/2 )^-2x7 ) / 14%/2 ] + [ $1,000 / ( 1 + 14%/2 )^2x7 ]

Price Value of the Bond = $55 x [ ( 1 - ( 1 + 7% )^-14 ) / 7% ] + [ $1,000 / ( 1 + 7% )^14 ]

Price of the Bond = $481.0+$387.82

Price of the Bond = $868.82

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Answer:

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Explanation:

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If both interest rates and down payment amounts lower, then the quantity demanded for houses should increase a lot, which will result in an increase in the prices of houses.

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7 0
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When a company prepares financial statements using standard costing, which items are reported at standard cost
Dmitrij [34]

Answer: Inventories and cost of goods sold.

Explanation:

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The difference that's then between the actual costs and expected costs are then recorded as variance. It should also be noted that when a company prepares financial statements using standard costing, the items that are reported at standard cost will be Inventories and the cost of goods sold.

7 0
2 years ago
Consider two very different firms, M and N. Firm M is a mature firm in a mature industry. Its annual net income and net cash flo
Bumek [7]

Answer:

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Explanation:

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wariber [46]

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