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Zigmanuir [339]
3 years ago
10

You are considering buying a 10-year, $1,000 par value bond issued by IBM. The coupon rate is 8% annually, with interest being p

aid semiannually. If you expect to earn a 10% rate of return on this bond, what is the maximum price you should be willing to pay for this IBM bond?
Business
1 answer:
ehidna [41]3 years ago
4 0

Answer:

The maximum price we should be willing to pay for this IBM bond is $ 877.

Explanation:

The price of bond can be determine by discounting all future cashlows we will get from bond in form of interest payment or redemption amount using expected rate of return.

The detail calculation is given below.

Price = 1000 * Discount factor + annuity factor * 80

Price = 1000 * 0.386 + 80 * 6.145     = 878

Discount factor = (1+10%)^-10 = 0.386

Annuity factor = (1 - (1+10%)^-10)/10% = 6.145

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The purpose why the person use the money is for medium of exchange.

<h3>What is money?</h3>

Money is a legal tender, approved by the government of a country as a means of exchange. Money is used to pay for services received and also for the purchase of goods.

Characteristics of money are:

  • Store of value
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Hence, the purpose why the person use the money is for medium of exchange.

Learn more about money here: brainly.com/question/1812645

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Answer:

$296,000

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3 years ago
Hisaoki picks up the local newspaper and reads a stinging letter to the editor criticizing his beverage company for supporting a
kiruha [24]

Answer: A. Identify issues.

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2 years ago
Ralph Young was a commercial tour boat operator on the northern coast of Kauai, Hawaii. He was licensed by the state of Hawaii t
Y_Kistochka [10]

Answer:

The correct answer is option (a) The court probably found that the state law was unconstitutional under the supremacy cause.

Explanation:

Solution

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