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sladkih [1.3K]
2 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]2 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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Explanation: A supply equation shows us the mathematical relationship between quantity supplied and the price of the good. Since price and supply are positively related, P must carry a positive sign in the supply equation.

Given, supply is Qs=4P - 24

P is the price paid by consumers in the market.

When a $3 tax is levied , price sellers receive becomes P-T = P - 3

So, the new supply equation will be

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Answer:

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4 0
2 years ago
Which of the following is not correct?
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Answer:

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Explanation:

The taste and preferences of the consumers are one of the factors affecting the demand for the goods. The demand for goods increases according to tastes and preferences. Another factor of an increase in demand is the expectation of a consumer regarding the future prices of the goods.

In the given scenario, Skippy's demand for the peanut butter will increase because of the above mentioned two reasons. Since he is very much fond of the peanut butter, the demand will remain constant. At the same time, after reading about the future unavailability of the peanut butter and the increase in the price of it, the demand for the peanut butter will rise the present day.

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Answer:

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