1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
umka21 [38]
2 years ago
9

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 8.5%, and sells for $1,150. Interest is

paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 9.5% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) b. What will be the rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual interest payments.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)
Business
1 answer:
andrey2020 [161]2 years ago
6 0

Answer:

a. Coupon payment = 8.5% of $1000 = $85

i = 9.5%

n = 9

m =$1,000

Price of the bond after one year P1 = C* [1- 1/ (1+i)^n] /i + M / (1+i)^n

P1 = $85 * [1 – 1 / (1+9.5%) ^9] /9.5% + 1000 / (1+9.5%) ^9

P1 = $499.40 + $441.85

P1 = $941.25

b. The rate of return on the bond = (Income from one coupon payment + capital appreciation)/ Initial price of the bond

The rate of return on the bond = [$85 + ($941.25 - $1,150)]/ $1,150

The rate of return on the bond = ($85 - $208.75)/ $1,150

The rate of return on the bond = - $123.75/ $1,150

The rate of return on the bond = - 0.1076

The rate of return on the bond = -10.76%

c. f the inflation rate during the year is 3%

Real rate of return =  [(1+ Nominal rate of return)/ (1+ Inflation rate)]-1

Where Nominal rate of return = - 10.76%, Inflation rate = 3%

Real rate of return =   [(1-10.76%)/ (1+ 3%)]-1

Real rate of return = 0.08664 -1

Real rate of return = - 0.1336

Real rate of return = -13.36%

You might be interested in
Due to increased corporate responsibilities, the manager of a sporting goods store has asked the assistant manager to take respo
Dahasolnce [82]

Answer:

B. Leadership

Explanation:

Leadership is the art for encouraging the people towards attaining a common goal. In this, it give directions to the workers & colleagues in order to meet out the needs of the company by having a strategy.

Since in the question it is mentioned that manager permit the assitant to make the decision but also scheduled the weekly meeting

So here the manager represent the leadership attribute

6 0
3 years ago
Goldman Inc. was organized on June 1, 2014. It was authorized to issue 500,000 shares of $10 par common stock and 100,000 shares
sdas [7]

Answer

The answer and procedures of the exercise are attached in a microsoft excel document.  

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.  

6 0
3 years ago
Sumitomo Bank, a large bank in southern California, has just purchased 120 high-speed telephone fax machines (costing about $1,3
Kruka [31]

Answer:

A) accessory equipment.

Explanation:

Accessory equipment is equipment that is fixed on a place or fixed to other equipment. If the accessory equipment is removed, the original equipment will continue to function as it did before.They must be depreciated since they cannot be expensed.

In this case, the fax machines work along side the telephones of Sumitomo bank and if removed, the telephones would still work. The IRS classifies fax machines as part of office furniture, fixture and equipment, and establishes a 7 year depreciation period.

7 0
3 years ago
Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower
torisob [31]

Answer:

both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.

Explanation:

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.

Consumer surplus = willingness to pay – price of the good

Let assume that the price before the sale and after the sale is $1000 and $800. The willingness to pay of customer A is $1500 and for customer b is $900

consumer surplus of customer A before sale = 1500 - 1000 = 500

consumer surplus of customer A after sale = 1500 - 800 = 700

consumer surplus of customer B before sale =  0

consumer surplus of customer B after sale = 900 - 800 = 100

consumer surplus of both customers increase

6 0
3 years ago
Concord Company has completed all of its operating budgets. The sales budget for the year shows 50,640 units and total sales of
marta [7]

Answer

The answer and procedures of the exercise are attached in the following archives.

Explanation  

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

Download xlsx
3 0
3 years ago
Other questions:
  • The effect of bulky or heavy products on transportation costs can make _______ an inappropriate strategy.
    7·1 answer
  • Total fixed costs for Taylor Incorporated are $260,000. Total costs, including both fixed and variable, are $500,000 if 156,000
    12·1 answer
  • Which functionality would you include in the product category of the marketing mix?
    15·1 answer
  • Economists sometimes give conflicting advice because
    9·1 answer
  • Suppose that Rihanna sells​ 1,000 tickets to a concerts at​ $480 each. If the equilibrium price is​ $600 per ticket for a fixed
    8·1 answer
  • One difference between services in the production of goods is that the services are consumed blank where as good as can be blank
    7·1 answer
  • Melissa recently paid $640 for round-trip airfare to San Francisco to attend a business conference for three days. Melissa also
    12·1 answer
  • CPA Inc. is a publicly traded company. The stockholders of this company delegate the authority to make decisions for the company
    5·1 answer
  • Selected transactions for the Ecker Company are listed below.
    11·1 answer
  • Match each type of tax with an example of its use.
    7·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!