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LenKa [72]
3 years ago
6

A firm issues two​-year bonds with a coupon rate of 6.9​%, paid semiannually. The credit spread for this​ firm's two​-year debt

is​ 0.8%. New two​-year Treasury notes are being issued at par with a coupon rate of 3.9​%. What should the price of the​ firm's outstanding two​-year bonds be per​ $100 of face​ value?
Business
1 answer:
fomenos3 years ago
4 0

Answer:

The price of the bond is $104.15

Explanation:

The price of the company's new two year debt is the present value of its future cash flows.

Since the debt pays coupon semi-annually the number of  coupons payable over two years is 4 and pays par value with the fourth coupon.

Yield to maturity is 3.9%+0.8%=4.7%/2=2.35% (semi-annually)

coupon rate is 6.9%/2=3.45%

PMT=3.45%*100

PMT=$3.45

par value $100

nper=2*2=4

Using present value formula in excel

pv=(rate,nper,pmt,fv)

pv=(2.35%,4,3.45,100)

pv=$104.15

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3 years ago
If the stock market is semistrong-form efficient, which of the following statements would be CORRECT? a. Even if a market is sem
Aleksandr-060686 [28]

Answer:

The correct answer is letter "A": Even if a market is semi-strong-form efficient, an investor could still earn a better return than the market return if he or she had inside information.

Explanation:

The semi-strong efficiency of the market is part of the Efficiency Market Hypothesis (EMH) that states <em>changes in stock prices can be predicted as the result of all available information provided to investors</em> instead of using fundamental or technical analysis. Thus, "beating the market" could be a matter of chance and not skill.

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5 0
3 years ago
What is the term for the daily activity of handling economic resources and planning for future economic goals?
ss7ja [257]

Answer:

Money Management

Explanation:

3 0
2 years ago
Barnette Inc.'s free cash flows are expected to be unstable during the next few years while the company undergoes restructuring.
kykrilka [37]

Answer:

Horizon value = $883

so correct option is e. $883

Explanation:

given data

FCF is expected = $50 million

time = 5 year

CF growth rate = 6% = 0.06

average cost of capital = 12% = 0.12

to find out

the horizon value

solution

we know that FCF at year 6 is here

FCF at year 6  = principal ( 1 + rate )

FCF at year 6 = 50 × (1 + 6%)

FCF at year 6  = 53 million

and

Horizon value will be here

Horizon value =  \frac{FCF at year 6}{required rate- growth rate}  

Horizon value =  \frac{53}{0.12-0.06}

Horizon value = 883.33

Horizon value = $883

so correct option is e. $883

6 0
2 years ago
Tyrone Northrup pays monthly rent of $1,240 for a one-bedroom apartment in a large city. He pays an extra monthly charge of $160
Leona [35]

Answer:

$18,910.00

Explanation:

Monthly rent $1240

Extra monthly charge $160

Electricity $90

Other utilities $860 per year

Insurance $170 per year

The monthly rent per year will be

=$1240 x 12

=$14,880

Parking charges per year

=$160 x 12

=$1,920

Electricity charges per year

=$90 x 12

=$1,080

Other utilities per year

=$860

Insurance per year

=$170

The annual cost will be

=$14,880 + $1,920 + $1,080 + $860 + $170

=$18,910.00

8 0
3 years ago
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