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JulsSmile [24]
4 years ago
10

Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.4 percent, a YTM of 6.4 percent, and has 17

years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6.4 percent, a YTM of 8.4 percent, and also has 17 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000.
1. What are the prices of these bonds today?
2. What do you expect the prices of these bonds to be in one year?
3. What do you expect the prices of these bonds to be in three years?
4. What do you expect the prices of these bonds to be in eight years?
5. What do you expect the prices of these bonds to be in 12 years?
6. What do you expect the prices of these bonds to be in 17 years?
Business
1 answer:
vivado [14]4 years ago
5 0

Answer:

Bond X $1,205.41

as it was issued at premium I expect the bond price to <u>decrease </u>as time passes to match the maturity value

Bond Y  $820.69

As it is below face value and at maturity the company with the coupon will receive 1,000 this value of 820.59 will <u>increase </u>over time to match it.

Explanation:

The market value of the bond will the present value of the coupon payment and maturity considering the yield to maturity rate

Bond X

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 42.000 (1,000 x 0.084 / 2 )

time 34 (17 years x 2 payment per year)

rate    0.032 (0.064 annual / 2 semiannual )

42 \times \frac{1-(1+0.032)^{-34} }{0.032} = PV\\

PV $862.7309

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity   1,000.00

time   34.00

rate  0.032

\frac{1000}{(1 + 0.032)^{34} } = PV  

PV   342.68

PV c $862.7309

PV m  $342.6812

Total $1,205.4121

Bond Y

32 \times \frac{1-(1+0.042)^{-34} }{0.042} = PV\\

PV $573.8007

\frac{1000}{(1 + 0.042)^{34} } = PV  

PV   246.89

Total $820.6873

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Answer:

(E). local and national norms

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8 0
3 years ago
A difference between explicit and implicit costs is that a) explicit costs must be greater than implicit costs. b) explicit cost
Andrej [43]

Answer:

Implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

Explanation:

Rent, salary, and other operating expenses are considered explicit costs. They are all recorded within a firm's financial statements, meaning they are present and clearly shown or reported as a separate cost. The main difference between the two types of costs is that implicit costs are opportunity costs, meaning that it is present but it is not initially shown or reported as a separate cost, while explicit costs are expenses paid with a company's own tangible assets. In other words, explicit costs are always shown, implicit costs are not, at least initially, exactly like the meaning words suggest.

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3 years ago
You need $20,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like
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Answer:

The annualy payment for theamortized loan is $6,802.44

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The annual payments AN is obtained by dividing the TP into the 4 years:

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4 0
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Diane is passionate about soccer and decides to open her own soccer sporting goods store. She invests her money, time, and effor
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Answer:

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Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,
dedylja [7]

Answer:

Borrowed amount of $2,500

Explanation:

The computation is shown below;

The Total available balance is

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