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GREYUIT [131]
3 years ago
5

.In 2027, instead of cashing in the bond for its then current value, you decide to hold the bond until it doubles in face value

in 2037. What annual rate of return will you earn over the last 10 years
Business
1 answer:
cricket20 [7]3 years ago
5 0

Answer:

The question is not complete,find below complete questions:

If you purchased a $50 face value bond in early 2017 at the then current interest rate of .10 percent per year, how much would the bond be worth in 2027? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. In 2027, instead of cashing the bond in for its then current value, you decide to hold the bond until it doubles in face value in 2037. What annual rate of return will you earn over the last 10 years?

The bond is worth $50.50 in the year 2027

The annual rate of return is 7.07%

Explanation:

The future value of the bond is given by the below formula:

FV=PV*(1+r)^N

where PV  is the present of the bond of $50

r is the rate of return of 0.10 percent=0.001

N is the duration of the bond investment of 10 years

FV=50*(1+0.001 )^10

FV=$50.50

However for the face of the bond to double i.e to $100, the rate of return can be computed thus:

r=(FV/PV)^(1/N)-1

where FV=$100 (double of $50)

FV=$50.50(current value in 2027)

N=10

r=($100/$50.50)^(1/10)-1

r=0.070707543

r=7.07%

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Hey there!

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Hope  I was able to help!
3 0
3 years ago
According to the CAPM, what is the market risk premium given an expected return on a security of 15.8%, a stock beta of 1.1, and
Anna35 [415]

Answer:

The risk premium on market is 8%

Explanation:

The CAPM or Capital Asset Pricing Model is used to calculate the required rate of return on a stock which is the minimum return that is expected or required by the investors to invest in a stock based on its systematic risk as measured by the beta of the stock.

The formula to calculate r under the CAPM is,

r = rRF + Beta * rpM

Where,

  • rRF is the risk free rate
  • rpM is the risk premium on market

To calculate the risk premium on market, we will input the available values for r, rRF and beta in the equation above.

0.158 = 0.07 + 1.1 * rpM

0.158 - 0.07 = 1.1 * rpM

0.088 / 1.1 = rpM

rpM = 0.08 or 8%

So, the risk premium on market is 8%

3 0
3 years ago
Businesses located in countries that have relatively weak domestic demand rarely make the leap to multinational enterprises beca
Olin [163]

Answer:

The correct answer is : False

Explanation:

The participation in local production might repress the growth of imports in a market for goods made of different types.  The domestic demand constitutes a great proportion or potential import suppliers. The domestic industry may influence its reaction to import competition, the prevalence of multinational enterprises (MNEs) is important.

6 0
3 years ago
Which resources would be classified as a land factor of production?
Pani-rosa [81]
Answe: C timber
Explanation:because is a resouce that is in land factor of production
8 0
2 years ago
The efficiency loss of a tax is the net benefit society gives up because
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consumption and production of the taxed product are reduced below the level of allocative efficiency which would occur without the tax.

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