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Ilia_Sergeevich [38]
3 years ago
7

Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 14 years to maturity, make semiann

ual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Business
1 answer:
beks73 [17]3 years ago
8 0

Answer: -18.80% for bond J, -15.46% for bond K

Explanation:

If interest rates suddenly rise by 2 percent, the percentage price change of bond J is -18.80% while the percentage price change of bond K is -15.46%

The calculation is provided below

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You are scheduled to receive annual payments of $3,600 for each of the next 12 years. The discount rate is 8 percent. What is th
KonstantinChe [14]

Answer:

A. $2,170.39

Explanation:

First, we understand that what we are dealing with is Ordinary annuity which represents payments received at the end of each year

As such, The Present value of Ordinary annuity is calculated using the following formula

= Annuity amount x (1-(1+r)∧-n ) /r

Plugging this formula into the schedule given in the question ew have teh following

First, the present value of the payments received at the end of each year

= $3,600 x (1- (1.08∧-12) / 0.10

= $27,129.88

Secondly, the present valueof the payments received at the beginning of each year

= = $3,600 x (1- (1.08∧-11) / 0.10

= $25,700.27 + $3,600 (the amont recieved today)

Total PV = $29,300.27

Finally, find the difference between the PV of cash flow received at the beginning and PV of Cash flow received at the end=

= $29,300.27-  $27,129.88

= $2,170.39

7 0
3 years ago
The Nash Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in t
polet [3.4K]

Answer:

BUILDING C

Explanation:

Calculation to determine In which building would you recommend that The Nash Inc. locate, assuming a 12% cost of funds

BUILDING A $611,000

Calculation for BUILDING B

Annual payments $71,370

X PV factor 8.65246=1+(1-(1.11)^-24)/0.12

Net present value $617,526.1

Calculation for BUILDING C

Annual rental $6,800

X PV factor 7.71993 =(1-(1.11)^-25)/0.12

Present value 52,495.5

Net present value =$657,400- $52,495.5

Net present value =$604,905

Net present value

Building A $611,000

Building B $617,526.1

Building C $604,905

Based on the above calculation Nash inc should locate itself in Building C because it has less Net present value

Therefore the building you would recommend that The Nash Inc. locate, assuming a 12% cost of funds is BUILDING C

4 0
2 years ago
Assuming that the company has retained earnings of "$86,000", all of which is to be paid out in dividends, and that preferred di
Sladkaya [172]

Answer:

a. preferred stock=$32000  ,  ordinary stock=$54000

b. preferred stock=$16000  ,   ordinary stock=$70000

Explanation:

Lets assume the company has two class of preferred stock, cumulative and non-cumulative. Cumulative preferred stock are shares whose fixed return (i.e fixed dividend) if not paid in one accounting period accumulates with forthcoming years' return and is paid in accumulation whereas non-cumulative preferred stock holders won't be paid for dividends not paid in a year.

Lets assume, Company has 2000 $100 par value 8% preferred stock and 5100 $50 par value ordinary shares.

1st case: CPS (Cumulative preferred stock) and OS (Ordinary stock.)

$86000 of retained earnings will be distributed as follows:

Preferred Stock dividend each year: 2000×$100×0.08

PS dividend=$16000 per year

Now accumulate for 2 years,

CPS dividend = $16000×2

<em>CPS dividend = $32000</em>

After preferred stock holders are paid, the remaining retained earnings are wholly distributed to ordinary stock holders.

Ordinary stock dividend = $86000 - $32000

<em>Ordinary stock dividend = $54000.</em>

2nd case: NCPS (Non-cumulative preferred stock) and OS (Ordinary stock).

$86000 of retained earnings will be distributed as follows:

NCPS dividend for the current year only = 2000×$100×0.08

<em>NCPS dividend for the current year only = $16000</em>

Now, the remaining is distributed to ordinary stock holders as follows:

Ordinary stock dividend = $86000 - $16000

<em>Ordinary stock dividend = $70000 </em>

3 0
3 years ago
Bankruptcy is the legal process of reducing or eliminating an amount owed.<br> O True<br> O False
vova2212 [387]
The answer would be trueee
3 0
3 years ago
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Your grandmother tells you a dollar doesn't go as far as it used to. She says the " purchasing power" of a dollar is much less t
Harrizon [31]

Answer:

See below

Explanation:

My grandmother is referring to the effect of inflation on the currency. Economist defines inflation as the general but gradual increase of prices in the economy over time. As a country experiences economic growth, prices of goods and services tend to increase. The government monitors the increase in prices using tools like the consumer price index (CPI). The resultant figure from the CPI is the inflation rate.

The government desires to keep the inflation rate at a predetermined optimal level. Should the economy grow at a fast pace, the inflation rate will probably rise. The government will respond with measures to control the growth and maintain stable prices.

An increase in prices means that the dollar will buy fewer goods and services than it could previously. A high inflation rate means prices are increasing at a fast pace. The dollar will buy fewer goods, which translates to dollar weakening.

Deflation is the opposite of inflation. It means a general decrease in price in the economy. During deflation times, the dollar gains strengths. It buys more goods and services than in the previous season.

4 0
3 years ago
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