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sladkih [1.3K]
3 years ago
10

holdy Inc's bonds currently sell for $1,275. They pay a $120 annual coupon and have a 20-year maturity, but they can be called i

n 5 years at $1,120. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between the bond's YTM and its YTC?
Business
1 answer:
ziro4ka [17]3 years ago
3 0

Answer:

Yield to maturity (YTM) is 1.91% higher than yield to call (YTC).

Explanation:

YTM = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]

YTM = {$120 + [($1,000 - $1,275)/20]} / [($1,000 + $1,275)/2] = $106.25 / $1,137.50 = 9.34%

YTC = {coupon + [(call price - market value)/n]} / [(call price + market value)/2]

YTC = {$120 + [($1,120 - $1,275)/5]} / [($1,120 + $1,275)/2] = $89 / $1,197.50 = 7.43%

9.34% - 7.43% = 1.91%

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Answer:

The question is incomplete, there is one option that remains missing. The option missing is:

Its customer value proposition as well as the company's profit formula.

And that is correct answer.

Explanation:

To begin with, the term known as "business model" refers to the specific course of action that a group of people have established to be the way that they will use in order to make a business and obtain a profit from it. Therefore that the most important elements of these model tend to be the customer value proposition as well as the company's profit formula given the business stated. Moreover, the business model is characterized as well for identifying the company's target audience and the product or service that they are planning to sell.  

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Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The bond pays $400 to its holder at the end of the
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Explanation:

Given that,

Purchases a bond = $10,000

Bond pays at the end of the first, second, and third years = $400

Bond pays upon its maturity at the end of four years = $10,400

(i) Principal amount of this bond = $10,000

It is the issue price of the bond.

(ii) The coupon rate of the bond = \frac{Interest\ Received}{Face\ value\ of\ bond}\times100

                                                     = \frac{400}{10,000}\times100

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A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the fol
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Government survey takers determine that typical family expenditures each month in the year designated as the base year are as fo
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Answer:

  • <u><em>1. CPI in the subsequent year: 1,135</em></u>

<u><em></em></u>

  • <u><em>2. Rate of inflation: 13.5%</em></u>

<u><em></em></u>

Explanation:

<u>1. Calculate the CPI</u>

<em></em>

<em>CPI </em>is the consumer price index.

CPI is created using a basket of goods and services that are typically consumed.

In the given case the typical basket is:

  • 25 pizzas
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Then to find the CPI for a determined year you multiply each item by its price and then add up all the results.

For the base year, the expenditures per month were:

  • 25 pizzas at $ 10: $10 × 25 = $250
  • Rent of apartment:  $600
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Then, the CPI for the base year is:

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The year following the base year, the expenditures per month are:

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Then the CPI for the followng year is:

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<u>2. Calculate the rate of inflation</u>

The rate of<em> inflation</em> is defined as the increase of the CPI of the given year with respect ot the base year:

The formula to calculate the rate of inflation is:

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  • Inflation = [ (1,135 - 1,000) / (1,000)]  × 100 = 13.5%

Hence, <em>the rate of inflation for the subsequent year is 13.5%</em>

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