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stiks02 [169]
3 years ago
13

A bond will sell at a premium (above par value) ifA) the market value of the bond is greater than the discount rate of the bond.

B) investor's current required rate of return is below the coupon rate of the bond.C) current market interest rates are moving in the same direction as bond values.D) the economy is in a recession.
Business
1 answer:
Anna11 [10]3 years ago
3 0

Answer:

B) investor's current required rate of return is below the coupon rate of the bond.

Explanation:

A bond that is sold at a price above its face value is said to be sold at a premium. A bond sells at a premium when its coupon rate is above the market's required rate of return.

When a bond is sold at a premium, it yields an interest rate which is lower than its coupon rate. For example, a bond's face value is $100 and its coupon rate is 8%. If the bond sells at a premium for $110, it will still pay the same coupon, but it will yield a 7.3% interest rate.

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Mice21 [21]
The correct answer is <span>D. Gerard Manley Hopkins

Other poets from the list either not use the iambic pentameter at all or stick to it. Gerard Manley Hopkins uses it as he likes it.</span>
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3 years ago
A(n) 11.0​%, ​25-year bond has a par value of​ $1,000 and a call price of ​$1 comma 025. ​(The bond's first call date is in 5​ y
mixas84 [53]

Answer:

the formula to calculate yield to maturity (YTM) is:

YTM = [C + (F - P)/n] / [(F + P)/2]          

  • F = face value
  • P = market price
  • n = number of years x 2 =
  • C = coupon      

the formula to calculate yield to call (YTC) is:

YTC = [C + (F - CP)/n] / [(F + CP)/2]      

  • F = face value
  • CP = call price
  • n = number of years x 2 =
  • C = coupon      

the formula to calculate current yield is:

Current yield = C / P

  • C = coupon
  • P = market price

A)

25 year bond, $1,000 face value, semiannual coupons, 11%, call price $1,025, market price $1,150:

YTM = [C + (F - P)/n] / [(F + P)/2]          

  • F = 1,000
  • P = 1,150
  • n = number of years x 2 = 25 x 2 = 50
  • C = 55      

YTM = [55 + (1,000 - 1,150)/50] / [(1,000 + 1,150)/2] =  [55 - 3] / 1,075 = 0.04837 or 4.84%  

YTC = [C + (F - CP)/n] / [(F + CP)/2]      

  • F = 1,000
  • CP = 1,025
  • n = number of years x 2 = 5 x 2 = 10
  • C = 55      

YTC = [55 + (1,000 - 1,025)/10] / [(1,000 + 1,025)/2] = [55 -2.50] / [1,012.50] = 0.05185 or 5.19%

Current yield = C / P

  • C = 55
  • P = 1,150

Current yield = 55 / 1,150 = 0.0478 or 4.78%

The highest value is the Yield to Call (5.19%) while the lowest value is the current yield (4.78%). Since the bonds were sold at a premium, the coupon rate is higher than the market rate, therefore, it is likely that the company will actually call them. So we should use the yield to call value.

B)

25 year bond, $1,000 face value, semiannual coupons, 11%, call price $1,025, market price $800:

YTM = [C + (F - P)/n] / [(F + P)/2]          

  • F = 1,000
  • P = 800
  • n = number of years x 2 = 25 x 2 = 50
  • C = 55      

YTM = [55 + (1,000 - 800)/50] / [(1,000 + 800)/2] =  [55 + 4] / 900 = 0.06555 or 6.56%  

YTC = [C + (F - CP)/n] / [(F + CP)/2]      

  • F = 1,000
  • CP = 1,025
  • n = number of years x 2 = 5 x 2 = 10
  • C = 55      

YTC = [55 + (1,000 - 1,025)/10] / [(1,000 + 1,025)/2] = [55 -2.50] / [1,012.50] = 0.05185 or 5.19%

Current yield = C / P

  • C = 55
  • P = 800

Current yield = 55 / 800 = 0.06875 or 6.88%

The highest value is the current yield (6.88%) while the lowest value is the Yield to Call (5.19%). Since the bonds were sold at a discount, the coupon rate is lower than the market rate, therefore, it is not likely that the company will actually call them. So we should use the yield to maturity value.

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3 years ago
Read 2 more answers
Fritz Evans is the owner and operator of Be-The-One, a motivational consulting business.
almond37 [142]

Answer:

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2014 Equity: 327,000

Explanation:

(A)

Assets = Liabilities + Equity

395,000 = 97,000 + Equity

395,000 - 97,000 = Equity

298,000 =  Equity

(B)

if asset increase by 65,000

and liabilities increase by 36,000

(395,000 + 65,000)  = (97,000 + 36,000) + Equity

460,000 = 133,000 + Equity

Equity = 460,000 - 133,000 = 327,000

5 0
2 years ago
FreeSpirit is a global consumer products company. It manufactures a number of new products ranging from personal care to food an
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Answer:  Prospector

                   

Explanation: In simple words, a prospector refers to an individual  or an entity that keeps exploring its environment for some personal goal. Usually these entities keeps continuous researching for innovation so that new products and practices could be developed.

In the given case, Free spirit keeps searching for new product development

and uses different platform for their promotional purposes.

Hence from the above we can conclude that it free spirit is a prospector.

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2 years ago
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