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Alex777 [14]
3 years ago
8

Is the yield to maturity on a bond the same thing as the required return? Is YTM the same thing as the coupon rate? Suppose toda

y a 10 percent coupon bond sells at par. Two years from now, the required return on the same bond is 8 percent. What is the coupon rate on the bond? What is the YTM on the bond?
Business
1 answer:
kiruha [24]3 years ago
6 0

Answer:

Explanation:

The yield to maturity on a bond is the same thing as the required return. The YTM and the coupon rate is a totally different thing. The coupon rate is the interest which is computed on the principal amount whereas yield to maturity is a rate which is held at the maturity and its rate is also generated in maturity date.  

So, in the given case, the Coupon rate is 10% and the YTM is 8% as it reflects the maturity i.e two years from now

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Answer:

Opportunity cost are experienced whenever choices are made

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This means that as a man may not be able to meet up with all his needs due to scarcity of resources , he will need to select the ones that are of utmost importance and forgo the other needs on the list , whichis the opportunity cost of the transaction.

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3 years ago
Suppose winston's annual salary as an accountant is $60,000, and his financial assets generate $4,000 per year in interest. one
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3 years ago
Simon recently received a credit card with an 18% nominal interest rate. With the card, he purchased an Amazon Kindle for $350.
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Answer:

A.50 months

B.12.92 months

C.$112.38

Explanation:

a). Using this formula

PV of Annuity = Monthly Payment * [{1 - (1 + r)-n} / r]

Where,

PV of Annuity =$350

Monthly Payment =$10

r=(0.18/12)

Let plug in the formula

$350 = $10 * [{1 - (1 + 0.18/12)-n} / (0.18/12)]

$350 / $10 = {1 - (1.015)-n} / 0.015

35 * 0.015 = 1 - (1.015)-n

(1.015)-n = 1 - 0.525

-n[log(1.015)] = log(0.475)

-n[0.0149] = -0.7444

n = -0.7444 / -0.0149

n= 50 months

b). Using this formula

PV of Annuity = Monthly Payment * [{1 - (1 + r)-n} / r]

Where,

PV of Annuity =$350

Monthly Payment =$30

r=(0.18/12)

Let plug in the formula

$350 = $30 * [{1 - (1 + 0.18/12)-n} / (0.18/12)]

$350 / $30 = {1 - (1.015)-n} / 0.015

11.67 * 0.015 = 1 - (1.015)-n

(1.015)-n = 1 - 0.175

-n[log(1.015)] = log(0.825)

-n[0.0149] = -0.1924

n = -0.1924 / -0.0149 =

n=12.92 months

c). Calculation for the Total Amount Paid under $10-a-month plan

Using this formula

Total Amount Paid under $10-a-month plan = No. of Payments * Monthly Payment

Where,

No.of Payments =50

Monthly Payment=10

Let plug in the formula

Total Amount Paid under $10-a-month plan= 50 * $10 = $500

Calculation for the Total Amount Paid under $30-a-month plan

Using this formula

Total Amount Paid under $30-a-month plan = No. of Payments * Monthly Payment

Where,

No. of Payments =12.92

Monthly Payment=$30

Let plug in the formula

Total Amount Paid under $30-a-month plan= 12.92 * $30 = $387.62

Hence,

Total Amount Paid under $10-a-month plan -Total Amount Paid under $30-a-month plan

= $500 - $387.62

= $112.38

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Answer:

b. $16,004.17

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