A company reports the following: Income before income tax $387,520 Interest expense 69,200 Determine the times interest earned.
1 answer:
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Answer:
Coupon rate = 0.04292 or 4.292%
Explanation:
To calculate the coupon rate of the bond, we will, use the formula for the price of the bond. As the bond is an annual bond, the coupon payment, number of periods and semi annual YTM will be,
Coupon Payment (C) = x
Total periods (n)= 8
r or YTM = 0.051 or 5.1%
The formula to calculate the price of the bonds today is attached.
948 = x * [( 1 - (1+0.051)^-8) / 0.051] + 1000 / (1+0.051)^8
948 = x * 6.437166243 + 671.7045216
948 - 671.7045216 = x * 6.437166243
276.2954784 / 6.437166243 = x
x = $42.92191128 rounded off to $42.92
Thus, the coupon payment on bond is $42.92
As the coupon payment is calculated by multiplying the coupon rate with the face value of the bond, then the coupon rate will be:
Coupon payment = face value * coupon rate
42.92 = 1000 * Coupon rate
Coupon rate = 42.92 / 1000
Coupon rate = 0.04292 or 4.292%
Answer:
Rate of return=0.222=22.2%
Explanation:
Price at which shares are sold=$45 per share
Number of shares=100 shares
Initial margin=50%=0.5
Price of share on repurchase=$40 per share
Required:
Rate of return if shares are repurchased=?
Solution:
Rate of return=
Profit earned=($45-$40)*100
Profit earned=$500
Initial Investment=(100*45)0.5
Initial Investment=$2,250
Rate of return=
Rate of return=0.222=22.2%