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Alexandra [31]
3 years ago
8

Keenan Industries has a bond outstanding with 15 years to maturity, an 8.75% coupon paid semiannually, and a $1,000 par value. T

he bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,050. What is the bonds nominal yield to call? Select one: a. 5.01% b. 5.27% c. 5.54% d. 5.81% e. 6.10%
Business
1 answer:
mixas84 [53]3 years ago
7 0

Answer:

b. 5.27%

Explanation:

First, find the PV of the bond today. With a financial calculator, input the following and adjust the variables to semi-annual basis;

Face value; FV = 1000

Maturity of bond; N = 15*2 = 30

Semiannual coupon payment = (8.75%/2)*1000 = 43.75

Semi annual interest rate; I/Y = 3.25%

then compute Price; CPT PV= 1,213.547

Next, with the PV , compute the yield to call (I/Y) given 6 years;

Maturity of bond; N = 6*2 = 12

Semiannual coupon payment = (8.75%/2)*1000 = 43.75

Price; PV= -1,213.547

Face value; FV = 1,050

then compute Semiannual interest rate; CPT I/Y = 2.636%

Convert the semiannual rate to annual yield to call = 2.636*2 = 5.27%

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Answer:

job B

Explanation:

.05*50000=2500  and he gets 1000 so his total would be 3500

7 0
3 years ago
Sand, Inc. has outstanding $5,000,000, 10%, 20-year bonds. The bonds are callable at 104 on any interest date. The bonds were is
Ray Of Light [21]

Answer: B) A loss of $200,000 on its income statement in the year the bonds are called.

Explanation:

The bonds were issued at Par. This means they were issued at 100 of par.

The bonds are now trading at 104 of par.

If Sand Inc calls the bonds then they will make a profit (loss) of,

= 5,000,000 * 104/100

= $5,200,000

Therefore their Profit (loss) will be the bond at par minus the Calling price

= 5,000,000 - 5,200,000

= -$200,000

That means they make a loss of $200,000 in the year the bonds are called.

If you need any clarification do react or comment.

6 0
3 years ago
Select three situations when an agency can perform a warrantless search.
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C or d im npt sure about d if its a emergency you would at least have to have permission from the owner of the property
8 0
3 years ago
On January 2, 2020, Vaughn Manufacturing began construction of a new citrus processing plant. The automated plant was finished a
12345 [234]

Answer:

Vaughn Manufacturing

1. The weighted-average accumulated expenditures for 2017 were:

c. $1,200,000.

2. The interest capitalized for 2017 was:

b. $144,000

3. The weighted-average accumulated expenditures for 2018 by the end of the construction period were:  

= $2,546,000.

4. The interest capitalized for 2018 was:

= $267,000.

Explanation:

a) Data and Calculations:

Expenditures for the construction were as follows:

Date                                   Amount of     No. of months  Weighted Average

                                         expenditure                                 Expenditure

2020:

January 2, 2020                 $613,000         12/12                     $613,000

September 1, 2020            1,802,400          4/12                       600,800

December 31, 2020          1,802,400          0/12                        0

Total weighted-average expenditure for 2020 =                $1,213,800

Which is approximately = $1,200,000

Interest capitalized = $144,000 ($1,200,000 * 12%)

Capitalized expenditure by December 31, 2020 = $1,344,000 ($1,200,000 + $144,000)

Date                                   Amount of     No. of months  Weighted Average

                                         expenditure                                 Expenditure

2021:

January 1, 2021                 1,344,000        9/9                   $1,344,000

March 31, 2021                  1,802,400       6/9                      1,201,600

September 30, 2021        1,203,000        0/9                      0

Total weighted-average expenditure for 2020 =           $2,545,600

Which is approximately $2,546,000

Interest capitalized for 2018 = $267,330 ($2,546,000 * 10.5%)

Approximately $267,000

7 0
3 years ago
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Andrej [43]

Answer:

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3 years ago
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