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DerKrebs [107]
3 years ago
9

Consider a bond with the following characteristics. Par: $1,000 Two coupon payments per year (i.e., coupons are paid semi-annual

ly) Coupon rate: 6.00% Years to maturity: 10 Bond price: $1,000 Suppose that the annual market interest rate for this bond jumps up by 1%. What is the new bond price?
Business
1 answer:
MAXImum [283]3 years ago
5 0

Answer:

The new price of the bond is $928.94

Explanation:

Initially the bond's price is equal to its par value which means the coupon rate on bond and the market interest rates are the same i.e. 6%.

Th bond's price is calculated as the sum of the present value of the annuity of interest payments by the bond and the present value of the face value of the bond that will be received at maturity. The discount rate used to calculate the present values is the market interest rate.

As the bond is a semiannual bond, we will use the semi annual coupon payment, the semi annual percentage of the annual rate of interest on market and the number of semi annual periods outstanding.

Semi annual coupon payment = 1000 * 0.06 * 6/12 = $30

Number of semiannual periods till maturity = 10 * 2 = 20 periods

New market interest rate = 6 + 1 = 7% annual

New semi annual market interest rate = 7% / 2 = 3.5%

Price of bond =  30 * [ (1 - (1+0.035)^-20) / 0.035 ] + 1000 / (1+0.035)^20

Price of bond = $928.938 rounded off to $928.94

We used the present value of annuity ordinary formula for preset value of interest payments and the normal present value of principal formula for the face value.

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Yakov, Ana, and Dina want to bake a cake. They are choosing among chocolate cake (C), vanilla cake (V), and red velvet cake (R).
vovangra [49]

Answer:

The specified preferences of Charles, Diana and Juanita. Charles and Juniata prefer chocolate over red velvet cake. Dina favors red velvet over chocolate.

So, when there is voting among red velvet and chocolate cake, the majority will select the Chocolate cake and among winner and vanilla majority will vote for Vanilla cake.

This is because Dina and Juanita favor vanilla over chocolate.

Among Chocolate and vanilla cake, the majority will elect for vanilla and among this winner and red velvet cake, the majority will choose for Red velvet cake.

This is because Diana and juanita favor vanilla over chocolate. So, vanilla cakes get majority elects. When there is voting among vanilla and red velvet , red vanilla acquire majority votes as charles and dina favor red velvet over vanilla.

The statement is False. The preferences are not transitive.

In the first situation chocolate is chosen to vanilla and red velvet is preferred to vanilla. Although, in the second situation, chocolate is favored to red velvet and vanilla is preferred to chocolate. Thus, the preferences do not exhibit transitivity.

8 0
3 years ago
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or b
loris [4]

Answer:

The correct answer is a) Payor Benefit

Explanation:

When the payor dies or becomes disabled, the insurer will suspend the premiums until the child reaches 19 years old, the child must be under age 18, or up to age 19 and still attending high school. Usually, the payor is a parent (father, mother, brothers).

4 0
3 years ago
Zoum Corporation had the following transactions during the year: Issued $250,000 of par value common stock for cash. Recorded an
ANTONII [103]

Answer:

-$210,000

Explanation:

Issued Common Stock at par for Cash $250,000

Less:

Declared and paid a cash dividend $20,000

Repayment of 6-year note payable $440,000

Net Cash provided by Financing Activities ($210,000)

8 0
3 years ago
The optimal solution to a linear programming model that has been solved using the graphical approach:______.
wlad13 [49]

Answer:

Option d would be the appropriate choice.

Explanation:

  • At either the vertices including its continuum that ranges exist the optimal solutions towards linear programming challenges. Throughout this instance, the feasible area is just the section between some of the blue as well as red sections of the green map.
  • The green squares that describe the point of convergence between some of the red or green outlines seem to be the optimal solution.

Some other choices don't apply to the specified situation. So, the best one is the one mentioned.

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3 years ago
What is one drawback shared by both monopolies and oligopolies?
garik1379 [7]

Answer:A.They can harm consumers by fixing prices.

3 0
3 years ago
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