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4 years ago

A bond investor is analyzing the following annual coupon bonds:

Business

1 answer:

Volgvan4 years ago

7 0

PART (A)

A - TRUE

Explanation:

Johnson Corporation's Coupon rate is 12% and the yield to maturity (YTM) of the bond is 9%. If the Coupon rate is greater than the YTM, the bond is trading at a premium, that is, its current price is greater than its par value.

FV = $1000

N = 10 Years

YTM = 9%

PMT = 12% x $1000 = $120

PV = ??

We calculate the PV (the current price) using a financial calculator

PV = Current Price = $1192.53

Current yield = (Annual Coupon Payment / Current market price) x 100

Current yield = ($120 / $1192.53) x 100 = 10.0626 %

The Current Yield for Johnson's bonds is greater than 9%

B - FALSE

Explanation:

The current yield of Johnson's bonds is 10.06% and therefore does not lie in the range between 0% and 9%

C - TRUE

Explanation:

Johnsons bonds have the highest total return becasue they ahve the highest coupon rate which is greater than the YTM, thei bons trade at a premium.

D - TRUE

Explanation:

When YTM = Coupon rate, the bonds current price is equal to its par value.

PART (B)

If a bond is selling for a price much lower than its par value, it is most likely that the bond is trading for a discount bond.

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The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at $60 First

Rus_ich [418]

Answer:

The answer is: the amount of inventory at the end of the year was $1,583 using the average cost method.

Explanation:

The average cost method calculates the cost of inventory by dividing the total costs of goods by the total units.

10 units x $60 = $600
25 units x $65 = $1,300
30 units x $68 = $2,040
15 units x $75 = $1,125

The total cost of inventory is $5,065 ($600 + $1,300 + $2,040 + $1,125)

The total units in inventory are 80 (10 + 25 + 30 +15)

To find the average cost per unit = $5,065 / 80 units = $63.31

If 25 units were left at the end of the year, then the total cost of inventory is $63.31 x 25 = $1,582,81 or $1,583

3 0

3 years ago

Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 25 percent for the next three years, with the growth

madam [21]

Answer:

$60.45

Explanation:

Recall that

Po = D1/r - g

Where

Po = current price of stock

D1 = net dividend expected

r = required return

g = constant growth rate

From the question, we are going to pay at super normal growth rate for 3 years followed by constant dividend policy. The value after three years can be calculated by using constant dividend growth formula and after that, present value will be calculated. Thus, current value of stock will be

= D1/(1 + r) + D2(1 + r)^2 + D3/(1 + r)^3 + D4/(r - g)(1 + r)^3

= 2.5 × 1.25/(1 + 13) + 2.5 × 1.25^2/(1 + 13)^2 + 2.5 × 1.25^3(1 + 13)^3 + 2.5 × 1.25 × 1.06/(13 - 6)(1 + 13)^3

= 2.77 + 3.06 + 3.38 + 51.24 = 60.45

Therefore, present value of stock is $60.45

4 0

3 years ago

Select the correct answer from each drop-down menu. [BLANK] is a tool of monetary policy in which the Federal Reserve buys and s

Katen [24]

open market operations

government securities

6 0

3 years ago

Read 2 more answers

As a new member of the Challenge for Charity Group, you notice that the association has its own way of operating. Last week, the

lyudmila [28]

THE COMPLETE PARTS OF THE QUESTION

(socializing, incorporating, recruiting, inducting) members into the culture of the organization through the use of _____ (org design, criteria for selecting club members, reward systems & norms, leader reactions to critical incidents)

Answer:

1) socializing

2). reward systems & norms

Explanation: SOCIALIZING is the act or process through which a person or group of persons interact with others and take part in the activities which others do.

REWARD SYSTEM is the term used to describe the various processes or steps involved in compensation or paying for the Activities of others.

NORMS are a set of customs and traditions which have been found to be generally accepted and adopted as way of life.

5 0

4 years ago

McLeod Fries, Inc. has budgeted sales for June and July at $670,000 and $770,000, respectively. Sales are 85% credit, of which 6

ratelena [41]

Answer:

Account receivable on July 31 = $261,800

Explanation:

We would not be making use of the information for June as the question says 60% is collected in the month of sale and 40% is collected in the following month . Therefore as at July 31, all of june sales would have been collected and won't be outstanding

July credit sales = 85% * $770,000 = $654,500

Collected in July (60%) = 60% * $654,500 = $392,700

Receivable as at 31 July = $654,500 - $392,700 = $261,800

8 0

3 years ago