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Ivahew [28]
2 years ago
6

Corporate bond A has a 6 percent coupon and matures in 3 years. Corporate bond B has a 6 percent coupon and matures in 15 years.

The current interest rate is 6 percent. By how much will Bond A and Bond B change in price if the market rate increases to 6.5 percent
Business
1 answer:
babymother [125]2 years ago
8 0

Answer:

New price of bond A = $986.76, this means that the price decreased by $13.24 or 1.32%.

New price of bond B = $952.99, this means that the price decreased by $47.01 or 4.7%.

Explanation:

Since the current market interest is 6%, then both coupons A and B are sold at face value. If the market interest increases to 6.5%, then

New price of bond A:

PV of face value = $1,000 / (1 + 6.5%)³ = $827.85

PV of coupon payments = $60 x 2.64848 (PV annuity factor, 6.5%, 3 periods) = $158.91

New price of bond A = $986.76, this means that the price decreased by $13.24 or 1.32%.

New price of bond B:

PV of face value = $1,000 / (1 + 6.5%)¹⁵ = $388.83

PV of coupon payments = $60 x 9.40267 (PV annuity factor, 6.5%, 3 periods) = $564.16

New price of bond B = $952.99, this means that the price decreased by $47.01 or 4.7%.

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Answer:

It's fair value at the date of the transfer

Explanation:

Transfers of securities between categories of investments should be accounted for at FAIR VALUE, with unrealized holding gains or losses treated in accordance with the nature of the transfer.

Available-for-sale securities are reported at fair value; changes in value between accounting periods are included in accumulated other comprehensive income in the equity section of the balance sheet.

The fair value option gives companies the option to report most financial instruments at fair value with all gains and losses related to changes in fair value reported in the income statement.

8 0
3 years ago
Assume that Cane normally produces and sells 62,000 Betas and 82,000 Alphas per year. If Cane discontinues the Beta product line
Talja [164]

Answer:

Please find the complete question in the attachment.

Explanation:

\beta the margin of contribution unit= 130-25-22-17-14 \ \ \ \ \ \  \ \ \ \ \ \ \ \ \ \ \ \ \ =52

\alpha Margin Contribution Unit = 90-10-21-7-10\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ = 42

8

Contribution losses =62000\times 42 \ \ \ \ \ \ \ \ \ \ \ \ = -2604000

Fixed cost avoidable =102000\times 20 \ \ \  \ \ \ \ \ \ \ \ \ \ \ \ \ \ = 2040000

The margin of Alpha contributions =17000\times 52 \  \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ =884000

Fiscal benefits (disadvantage)= 320000

3 0
3 years ago
Pogisa is a director at trendz corp. after studying and consulting with experts, pogisa votes to have trendz sell a tract of lan
Alenkasestr [34]

She may be entitled to protection under the <u>Business Judgement Rule</u>, which is a doctrine that courts generally defer to the business decisions of company executives when the decisions were in good faith.  

4 0
3 years ago
The aggregate demand curve
laiz [17]

Answer:

<u>B. shows planned purchase rates of goods and services at various price levels.</u>

Explanation:

  • The aggregate demand is the total demand for final goods and services in the economy over a given period of time. And is often distinguished as the effective demand curve. That is the demand for the GDP of the nation.
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3 years ago
The intent of corporate advertising is to make sure that all of a company's products are seen in a common, positive manner. True
evablogger [386]

Answer:

False since the intent of corporate advertising is usually done to ensure that the perception of the company's image is positive.

Explanation:

Corporate advertising is usually done to ensure that the perception of the company's image is positive. The products under the corporation is not a priority in this case, rather its is the company as a whole that needs to be viewed in good light.

This kind of advertising forms part of the public relations techniques used by the company or institution to improve its public image. There are so many companies with different brands under them that utilize this advertising technique to improve their standing in the public eye. It is a way of making the company itself to be a brand by advertising the company as a package.

These companies always want to prove that they care more about the public than they care for the products, in this way they create the perception that the company is primary and anything else is secondary.

Cooperate advertising is majorly used in companies whose business activities have a negative effect to the public. Cooperation that engage in mining activities or activities that affect the environment are likely to utilize this form of advertising.

6 0
3 years ago
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