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Ivahew [28]
3 years ago
11

Your company currently has $ 1 comma 000 ​par, 6 % coupon bonds with 10 years to maturity and a price of $ 1 comma 078. If you w

ant to issue new​ 10-year coupon bonds at​ par, what coupon rate do you need to​ set? Assume that for both​ bonds, the next coupon payment is due in exactly six months.
Business
1 answer:
Stella [2.4K]3 years ago
3 0

Answer:

The next  coupon rate that is needed to​ set is 5.00%

Explanation:

Solution

Recall that:

Your company presently has =$1,000 par

Coupon bonds = 6%

Maturity = 10 years

The next step is to find the coupon rate that is needed or required to set.

Now,

The number of semi annuals to maturity, NPER =  (10 YEARS * 2)= 20

Semiannual coupon payments, PMT = ($1000 * 6%/2) = $30

The current selling price per bond  (FV) = $1078

The maturity value at the end is = $1000

The semiannual compound type, = 0 (It is 0 if compounded at the end of each semiannual and is 1 if compounded at the start of each semiannual)

Semi annual interest rate is = 2.5%

Thus,

The number of semi annuals in a year is = 2

The annual coupon rate of bonds (new) = 2/50 % * 2

= 5.00%

It is important to note that the semi annual coupon rate is computed suing the excel function rate (nper, pmt, pv,  fv, type),

Whereby

PV =1078

NPR = 20

PMT =30

FV = 1000

TYPE = 0.

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3 0
3 years ago
Swifty Corporation is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product i
Bumek [7]

Answer:

See below

Explanation:

Assembled product

Cost = $24 + $20 = $44

Selling price = $69

Profit = $69 - $44 = $25

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Selling price = $56

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3 years ago
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I think A if not than B I’m sorry if I’m incorrect
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Knowledge Check 01 Addison Corporation is considering the purchase of equipment that would increase sales revenues by $250,000 p
Flauer [41]

Answer:

C. 25.5%

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Next, calculate the rate of return  using Net operating cashflow per year and the equipment cost. You can do this with a financial calculator;

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Therefore the return is closest to 25.5%

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