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sashaice [31]
3 years ago
14

Up in Smoke Tobacco Shops' bond carries a 9 percent coupon, pays interest semiannually, and has 10 years to maturity. What is th

e bond's yield to maturity if the bond is selling for $937.75 (rounded to the nearest whole percent)
Business
1 answer:
lara [203]3 years ago
6 0

Answer:

10%

Explanation:

Since the bond is selling at a discount, it means that the coupon rate is blow the market rate, so the actual rate must be higher. Since there is only one option with an interest rate above 9%, we must check to see if it works.

10% yearly interest rate = 5% semiannual interest rate

we must determine the PV of the 20 coupons paid and the face value at maturity.

to calculate the PV of the 20 coupons ($45 each) we can use an excel spreadsheet and the NPV function with a 5% discount rate: PV of the coupons = $560.80

the PV of the face value in 10 years = $1,000 / 1.05²⁰ = $376.89

the present value of the coupons and the bond at maturity = $560.80 + $376.89 = $937.69. The PV using a 5% semiannual rate is very similar to $937.75, and since the question asked us to round up to the nearest whole percent, we can assume it is correct.

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Answer:

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8 0
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2 years ago
Holding cash simply as a financial reserve is referred to as the ____ motive.
mel-nik [20]
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7 0
3 years ago
Suppose that the price of labor (PL) is $10 and the price of capital (PK) is $20. What is the equation of the isocost line corre
gayaneshka [121]

Answer:

$100 = $10PL + $20PK

Explanation:

Computation for the equation of the isocost line

Using this formula to compute the equation of the isocost line

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Where,

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Now Let plug in the formula to compute the equation of the isocost line

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Therefore the equation of the isocost line corresponding to a total cost of $100 will be $100 = $10PL + $20PK

8 0
3 years ago
Quantities on hand at the end of one month may not be sufficient to last until the next month's count. If the company has taken
agasfer [191]

Answer:

True

Explanation:

The correct option is - True

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