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Montano1993 [528]
3 years ago
14

Consider an investor who, on January 1, 2019, purchases a TIPS bond with an original principal of $116,000, an 10 percent annual

(or 5 percent semiannual) coupon rate, and 15 years to maturity. a. If the semiannual inflation rate during the first six months is 0.4 percent, calculate the principal amount used to determine the first coupon payment and the first coupon payment (paid on June 30, 2019). b. From your answer to part a, calculate the inflation-adjusted principal at the beginning of the second six months. c. Suppose that the semiannual inflation rate for the second six-month period is 1.0 percent. Calculate the inflation-adjusted principal at the end of the second six months (on December 31, 2019) and the coupon payment to the investor for the second six-month period.
Business
1 answer:
lakkis [162]3 years ago
6 0

Answer:

(a) $5,823.20

(b) $116,464.

(c) $5,881.43.

Explanation:

Given that,

Original principal = $116,000

Interest rate = 0.5% semi-annual

Time period = 10 years

Inflation rate = 0.4% semi-annual

(b) Inflation adjusted premium at the end of 6 months on June 30,2019:

= Original principal × Semi-annual inflation rate

= $116,000 × (1 + 0.004)

= $116,464.

Therefore, the inflation adjust principal at the beginning of six months is $116,464.

(a) First coupon payment paid on June 30,2019:

= inflation adjust principal × Interest rate

= $116,464 × 0.05

= $5,823.20

(c) Inflation adjusted premium at the end of 6 months on December 31,2019:

= Principal in June 30,2019 × Semi-annual inflation rate

= $116,464 × (1 + 0.01)

= $117,628.64.

Coupon payment on December 31,2019:

= Inflation adjusted premium × Interest rate

= $117,628.64 × 0.05

= $5,881.43.

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LUCKY_DIMON [66]

Answer:

A. 37,500 balls

B.2.67

Explanation:

A. Compution for the CM ratio and the break-even point in balls.

First step is to calculate the Contribution margin

Selling price $25 100%

Variable expenses $15 60%

Contribution margin $10 40%

($25-$15)

Now let calculate the CM ratio and the break-even point in balls using this formula

Unit sales to break even=Fixed expenses/Unit contribution margin

Let plug in the formula

Unit sales to break even=$375,000/$10

Unit sales to break even= 37,500 balls

Therefore the CM ratio and the break-even point in balls will be 37,500 balls

b. Computation for the degree of operating leverage at last year

Using this formula

Degree of operating leverage =Contribution margin/Net operating income

Let plug in the formula

Degree of operating leverage=$600,000/$225,000=

Degree of operating leverage = 2.67 (rounded)

Therefore the degree of operating leverage at last year will be 2.67

5 0
3 years ago
Determine the beginning cash balance for Sweet Treats Eats if the net cash provided by operating activities is $35,000, net cash
Nataly_w [17]

Answer:

$50,000

Explanation:

Given the following information for Sweet Treats Eats

net cash provided by operating activities = $35,000

net cash used by investing activities = $42,000

net cash provided by financing activities = $12,000

ending cash balance = $55,000

Beginning cash balance + $35,000 - $42,000 + $12,000 = $55,000

Beginning cash balance = $55,000 - $35,000 + $42,000 - $12,000

                                         = $50,000

6 0
3 years ago
Friendly's quick loans, inc., offers you "ten for twelve or i knock on your door." this means you get $10.00 today and repay $12
valkas [14]

Answer:

Friendly's would say you were paying <u>1042.86% APR</u>.

Explanation:

Annual percentage rate (APR) can be described as the yearly interest rate that is paid by a borrower to a lender which is expressed in percentage term without taking compounding into consideration.

Annual Percentage Rate (APR) can be determined using the following formula:

APR = {[(Fees + Interest amount) / Principal / n] * 365} * 100 ……………… (1)

Where;

APR = ?

Fees = 0

Interest amount = Amount to repay - Amount to borrow = $12.00 - $10.00 = $2.00

Principal = Amount to borrow = $10.00

n = Number of days in the loan term = One week = 7 days

Substituting the values into equation (1), we have:

APR = {[(0 + 2) / 10 / 7] * 365} * 100

APR = 1042.86%

Therefore, friendly's would say you were paying <u>1042.86% APR</u>.

5 0
2 years ago
If demand increases and supply stays the same, there will be a _____. Lower equilibrium price and quantity lower equilibrium pri
lozanna [386]

Answer:

Higher equilibrium price and lower quantity

Explanation:

If demands increases and the supply remains same then the equilibrium price of the quantity increases decreases the equilibirium quantity due to high demand of quantity.

Therefore, Correct option is (d) i.e., higher equilibrium price and lower quantity

6 0
3 years ago
Read 2 more answers
The intensity of competition is greater in declining industries in which: a. the product is easy to differentiate. b. exit barri
Oksi-84 [34.3K]

Answer:

b. exit barriers are high

Explanation:

Declining industries are those industries wherein the industry has saturated and experiences a negative growth. The characteristic of such industries being the products are lesser in demand.

For instance, cassettes and magnetic tapes industry was in demand until the arrival of more advanced forms such as compact discs and usbs, post which those industries turned into declining industries.

A declining industry with high barriers to exit would experience a greater competition since the barriers would encourage competition instead of withdrawal. And with higher costs of withdrawal, the firms continue producing at negative growth.

4 0
3 years ago
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