After successfully operating for five years, Tina plans to sell her computer service center. Which of the following would be Tin
1 answer:
You might be interested in
Answer:
(a) 9.9%
(b) 10.09%
The further explanation is given below.
Explanation:
The given values are:
Coupon payment
= $99
Price
= $1,000
(a)
The Yield to maturity (YTM) will be:
=
where,
C = Coupon payment
P = Price
n = years to maturity
F = Face value
On putting the estimated values is the above formula, we get
⇒
⇒
⇒ %
(b)
Although the 1st year coupon was indeed reinvested outside an interest rate of r%, cumulative money raised will indeed be made at the end of 2nd year.
=
Came to the realization compound YTM is therefore a function of r, as is shown throughout the table below:
Rate (r) Total proceeds Realized YTM ()
7.9% 1205.8 9.8%
9.9% 1207.8 9.9%
11.9% 1209.8 9.99%
Now,
Overall proceeds realized YTM:
=
=
=
=
=
=
= %
Answer:
The maximum time guaranteed = 19.04 minutes.
Explanation:
From the given problem data, we have:
Let Y be the random variable which follows the normal distribution.
So,
Y ~ N(u = 15, SD = 2.4
Where, u = mean and SD = Standard Deviation
Let the maximum time guaranteed is = M
So,
P (Y > M) = 0.05 equation 1
Convert this equation 1 into standard normal variable, that is,
P(Y> M) = 0.05
1 - P(Y M) = 0.05
P(Y M) = 1 - 0.05
P(Y M) = 0.95
P = 0.95
P ( Z ) = 0.95 Equation 2
From the equation 2, we have,
= 1.644853627
1.644853627 value is from using the function of Excel
( =NORSINV(0.95)) = 1.644853627
So,
M = 1.644853627 + 2.4 + 15
M = 19.04
Hence, the maximum time guaranteed = 19.04 minutes.