Answer:
Market price of the bond = $912.53
Explanation:
YTM = 6.90%
Coupon rate = 5.87%
Number of compounding per year = 2
YTM Per perid = 0.0345
Years = 13
Number of period = 26 (Nper)
Par value = 1,000
Semi annual coupon rate = 0.02935
The semi annual coupon payment = Par value * Semi annual coupon rate = 1,000 * 0.02935 = $29.35
Market price of the bond = PV(YTM, Nper, Semi annual coupon payment,Par value)
Market price of the bond = $912.53
Answer:
A. Cost of funds has changed
B. Firm's risk has changed
Explanation:
The required rate of return on bonds refers to an investor's expected rate of return which is based upon rate of return other investors earn in the market on similarly priced bonds. This is also referred to as yield to maturity i.e YTM.
Coupon rate of payment of bond is the interest payment on such bonds which is usually fixed at the time of issue of such bonds.
Required rate of return may differ on account of change in cost of funds to the issuer which is cost of debt denoted as
. Cost of debt is determined by tax rate and net proceeds from the issue of such bonds.
Required rate of return may also change on account of change in the firm's risk. If the firm assumes more risk, such risk would deter investors from investing in such bonds and in such scenario, the firm has to offer higher coupon rate than the rate prevailing in the market to attract the investors.
Answer:
Bank A should be chosen.
Explanation:
Given:
Effective annual rate (EAR) of bank A = 10%
Bank B pays 9% compounded daily. EAR of bank B is calculated below:
EAR = 
Where, i is 0.09
n is compounding period that is 365 (since it is compounded daily)
EAR = 
= 1.0942 - 1
= 0.0942 or 9.42%
Bank B pays EAR of 9.42%
Based on EAR, Bank A should be selected as it pays higher EAR of 10%.
Let's analyze in the case of manufacturer's emission that cause polution
Usually, these pollution-producing companies are regulated to pay several amount of money in order to rehabilitate the environment that caused by their harmful material.
This is really inefficient , if they have to repair it, why allow them to destroy the environment in the first place ?
That's how emission standards could reduce the inefficiency