Answer:
market price of bonds = $219,597.35
Explanation:
Since the coupon rate is higher than the market rate, the bonds will be sold at a premium.
PV of face value = $200,000 / (1 + 3%)³⁰ = $82,397.35
PV of coupon payments = $7,000 x 19.600 (PV annuity factor, 3%, 30 periods) = $137,200
market price of bonds = $219,597.35
Answer:
(a) 8.90%
(b) $102.04
Explanation:
(a) Market capitalization rate i.e. expected return:
= Risk free rate + Beta (Market return - Risk free rate)
= 4% + 0.70 (11% - 4%)
= 8.90%
Therefore, the market capitalization rate is 8.90%.
(b) Intrinsic value of stock:
= Expected dividend ÷ (Required return - Growth rate)
= $5 ÷ (8.90% - 4%)
= $102.04
Therefore, the intrinsic value of the stock is $102.04.
Answer:
The correct answer is option b.
Explanation:
In an open economy, domestic firms have to face competition from the foreign producers. If firms face losses in the long run, because of import competition, these firms will leave the industry.
As the number of domestic firms get reduced, the demand curve of the other firms will become flatter. This happens because of the foreign firms that bring in a large variety of goods in the domestic market.
Answer:
A production possibilities frontier identifies the dollar cost of producing a good or service in an economy.
True
Explanation:
Cost of producing could be envisaged through budgeting where the variable cost, fixed cost and total cost is expected to be calculated either through rough estimate.
Answer:
Opportunity cost of holding the money = $1.650
Explanation:
Opportunity cost is the value of the next best alternative sacrificed in favour of a decision.
The opportunity cost of holding the money is the interest on deposit that would be have been earned should it be invested at the savings rate.
Interest on savings deposit = interest rate × deposit
= 2.5%× 66,000= $1,650
Opportunity cost of holding the money = $1.650
