I just need help understanding how to work through this

uppose you buy a bond with a coupon of 7.8 percent today for $1,080. The bond has 5 years to maturity. Assume interest payments

Mariulka [41]

Answer:

45.58%

Explanation:

Rate of return is the expected gain or loss on an investment, over a specific time period. It is derived as a percentage of the investment's original value or cost.

ROR = [CV - IV]/ IV × 100

CV is the current value of the investment (value at the end of the investment period)

IV is the initial value of the investment.

Note also, the assumption that interest payments are reinvested.

At the end of year 1, interest payment is $1,164.24

End of year 2 - $1,255.05

End of year 3 - $1,352.95

End of year 4 - $1,458.48

End of year 5 - $1,572.24

[Interest rate - 7.8%]

ROR = (1572.24 - 1080)/1080 × 100

ROR = 45.58%

5 0

3 years ago

The crawford company has 3,000 units in beginning finished goods. the sales budget shows expected sales to be 12,000 units. if t

Olenka [21]

Formula: Finished Goods Inventory Beginning - Sales in units + Produced units= Ending Inventory

3000-12000+14000= 5000 Ending finished goods inventory in units
-ahnnahly

3 0

2 years ago

Two investment advisers are comparing performance. One averaged a 19% return and the other a 16% return. However, the beta of th

pentagon [3]

Answer (A):

Need more data to select the better adviser

Explanation: 

Adviser A averaged 19% return on the investment which is more than that of Adviser B who averaged 16% return on investment. However, adviser A has a beta of 1.5 which is also greater than that of Adviser B who has a beta of 1. This means that adviser A made a more riskier investment and hence a higher average return on investment. We need more data to tell which adviser performed better in relation to each other.

Answer (B):

Investment Adviser B

Explanation:

$R_{f}$ = T-bill rate = 6%

$R_{m}$ = Market return = 14%

$R_{m} - R_{f}$ = Market risk premium = 14% - 6% = 8%

$ER_{a}$ = Average Return by Adviser A =19%

$\beta _{a}$ = Beta of Adviser A = 1.5

$ER_{b}$ = Average Return by Adviser B =16%

$\beta _{b}$ = Beta of Adviser B = 1

CAPM Equation is $ER_{i} = R_{f} +\beta (R_{m} - R_{f} ) +\alpha$

For Adviser A

$ER_{i}$ = 6 + 1.5 (14 - 6) = 18%

The expected average return for the investment is 18% which means that Adviser A over performed the market by 1 %

For Adviser B

$ER_{i}$ = 6 + 1 (14 - 6) = 14%

The expected average return for the investment is 14% which means that the Adviser B over performed the market by 2 %

Clearly, Adviser B performed better than Adviser A.

Answer (C):

Adviser B

Explanation:

In this part, the $R_{f} = 3 %$ and $R_{m} = 15%$

All else remains the same

We make similar calculation as in part B

4 0

3 years ago

Rashid, the CEO of Top Productions, said to his new vice president of accounting, "In the past I had resistance to new ideas by

STALIN [3.7K]

Answer:

The correct answer is (e)

Explanation:

Strategy implementation is an integral part of business activities. It is the responsibility of managers to keep an eye on all the process and make sure that all strategies are properly implemented. So, selling middle and supervisory manager on changes to overcome their resistance is often a necessary part of strategy implementation. It’s their duty to handle the resistance from employees and other staff members.

5 0

2 years ago

Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment sp

enyata [817]

Answer:

left by 30 billons

then right by 40 billons

Explanation:

the aggregate demand curve will move to the left as the consumption of the economy will fall as the household are less wealthy than before.

Then, as the interest rate fall the aggregate demand curve will move to the right as the investing increase as now more projects are profitable.

Calculations:

5 billon for every point of wealth:

6 points x 5 billon = 30 billons

20 billion of inventing per 1% of interest rate decrease

2 points x 20 billions = 40 billons

7 0

3 years ago