After carefully going over your budget, you have determined you can afford to pay $632 per month toward a new sports car. You ca
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Complete Question:
Suppose a five-year, $1000 bond with annual coupons has a price of $903.35 and a yield to maturity of 5.6%. What is the bond's coupon rate?
Answer:
3.396% Approximately
Explanation:
We can calculate the coupon interest by using the formula given in the attachment.
Now, here we have:
F is the Face value which is $1000
P is the price of the bond which in this case is $903.35
C is the Coupon interest
n are the number of years which is 5 years in this case
Yield to Maturity is 5.6%
By putting the values in the given equation we have:
5.6% = [C + ($1000 - $903.35)/5 years] / [($1000 + $903.35)/2]
5.6% = [C + 19.33] / [951.675]
0.056 * 951.675 = C + 19.33
53.2938 = C + 19.33
C = 53.2938 - 19.33
C = $33.96 approximate estimate.
Now we will find the coupon rate by using the following formula:
Coupon Rate = Coupon Interest / Face Value
By putting values, we have:
Coupon Rate = $33.96 / $1000 = 3.396% Approximately.
Accurate Coupon interest can be calculated using excel. The above answer gives minor difference in decimal points.
Solution :
The optimal order quantity, EOQ =
EOQ =
= 115.47
The expected number of orders =
= 17.32
The daily demand = demand / number of working days
= 8.33
The time between the orders = EOQ / daily demand
= 13.86 days
ROP = ( Daily demand x lead time ) + safety stock
= 76.64
The annual holding cost =
= 207.85
The annual ordering cost =
= 207.85
So the total inventory cost = annual holding cost + annual ordering cost
= 207.85 + 207.85
= 415.7