A
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Answer:
Periodic payment = $3,881.88 (Approx).
Explanation:
Given:
Present value of annuity = $36,500
Rate = 6.5% = 0.065
Number of payment = 15
Computation:
![Present\ value\ of\ annuity = periodic\ payment[\frac{1-(1+r)^{-n}}{r} ]](https://tex.z-dn.net/?f=Present%5C%20value%5C%20of%5C%20annuity%20%3D%20periodic%5C%20payment%5B%5Cfrac%7B1-%281%2Br%29%5E%7B-n%7D%7D%7Br%7D%20%5D)
![36,500 = periodic\ payment[\frac{1-(1+0.065)^{-15}}{0.065} ]\\\\36,500 = periodic\ payment[\frac{1-(1.065)^{-15}}{0.065} ]\\\\36,500 = periodic\ payment[\frac{1-0.388826524}{0.065} ]\\\\36,500 = periodic\ payment[\frac{0.611173476}{0.065} ]\\\\36,500 = periodic\ payment[9.40266886 ]\\\\periodic\ payment = 3,881.87658](https://tex.z-dn.net/?f=36%2C500%20%3D%20periodic%5C%20payment%5B%5Cfrac%7B1-%281%2B0.065%29%5E%7B-15%7D%7D%7B0.065%7D%20%5D%5C%5C%5C%5C36%2C500%20%3D%20periodic%5C%20payment%5B%5Cfrac%7B1-%281.065%29%5E%7B-15%7D%7D%7B0.065%7D%20%5D%5C%5C%5C%5C36%2C500%20%3D%20periodic%5C%20payment%5B%5Cfrac%7B1-0.388826524%7D%7B0.065%7D%20%5D%5C%5C%5C%5C36%2C500%20%3D%20periodic%5C%20payment%5B%5Cfrac%7B0.611173476%7D%7B0.065%7D%20%5D%5C%5C%5C%5C36%2C500%20%3D%20periodic%5C%20payment%5B9.40266886%20%5D%5C%5C%5C%5Cperiodic%5C%20payment%20%3D%203%2C881.87658)
Periodic payment = $3,881.88 (Approx).
Answer:
The correct answer is the option C: When other perfectly competitive firms see an opportunity to earn profits and enter the market the prices drop.
Explanation:
To begin with, in the microeconomics theory the perfect competitive market is characterized by the fact that there a lot of companies that sell an homogenous product and that are price takers of the market itself. So therefore that the only big difference in the firms are the costs and the prices that they have. Moreover, in the long run the firms are obtaining great profits so that leads to the enter of another more companies to the market and the supply rises the prices will have to go low so that will implicate as well a decrease in the prices of every company that now works in that industry.
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Answer:
$1,138.92
Explanation:
Current bond price can be calculated present value (PV) of cash flows formula below:
Current price or PV of bond = C{[1 - (1 + i)^-n] ÷ i} + {M × (1 + i)^-n} ...... (1)
Where:
Face value = $1,000
r = coupon rate = 7.2% annually = (7.2% ÷ 2) semiannually = 3.6% semiannually
C = Amount of semiannual interest payment = Face value × r
C = $1,000 × 3.6% = $36
n = number of payment periods remaining = (12 - 1) × 2 = 22
i = YTM = 5.5% annually = (5.5% ÷ 2) semiannually = 2.75% semiannually = 0.0275 semiannually
M = value at maturity = face value = $1,000
Substituting the values into equation (1), we have:
PV of bond = 36{[1 - (1 + 0.0275)^-22] ÷ 0.0275} + {1,000 × (1 + 0.0275)^-22}
PV of bond = $1,138.92.
Therefore, the current bond price is $1,138.92.
