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2 years ago

9

On December 31, 2021, Interlink Communications issued 6% stated rate bonds with a face amount of $119 million. The bonds mature

on December 31, 2051. Interest is payable annually on each December 31, beginning in 2022. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Determine the price of the bonds on December 31, 2021, assuming that the market rate of interest for similar bonds was 7%

1 answer:

Tamiku [17]2 years ago

8 0

Answer:

Price of the bond is $104,236,860.

Explanation:

Given:

Coupon rate is 6% or 0.06

Face value = $119,000,000

Coupon payment each year = 0.06×119,000,000

= $7,140,000

Yield to maturity = 7% or 0.007

Maturity period = 30 years

Price of bond = Present value of face value + present value of coupon payment (annuity)

Price of bond = $119,000,000_{(PV\ 30,0.07)} + 7,140,000_{(PVA\ 30,0.07)}$

PV of $1 for 7%,30 periods = 0.1314

PVA of $1 for 7%,30 periods = 12.409

Substitute the values in above formula:

Price of bond = (119,000,000 × 0.1314) + (7,140,000 × 12.409)

= 15,636,600 + 88,600,260

= $104,236,860

There will be slight difference in final answer as present value table is used. Excel spreadsheet gives an accurate answer.

So, price of bond is $104,236,860

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2 years ago

Explain the reasons why risk management might increase the value of a corporation?

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Risk management is to increase a firm ’s profitability;

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3 years ago

n the first two years your investment increases by 2.5% annually, in the third year it returns 12% but in the fourth year it goe

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Answer:

Ans. The average annual rate of return over the four years is 2.792%

Explanation:

Hi, first let´s introduce the formula to use

$r(Average)=\sqrt[n]{(1+r(1))*(1+r(2))*(1+r(3))+...(1+r(n))}-1$

Where:

r(1),(2),(3)...n are the returns in each period of time

n =number of returns to average (in our case, n=4).

With that in mind, let´s find the average annual return over this four years.

$r(Average)=\sqrt[4]{(1+0.025)*(1+0.025)*(1+0.12)+(1-0.07))} -1=0.022792$

Therefore, the average annual return of this invesment in 4 years is 2.2792%

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3 years ago

Gardial & Son has an ROA of 11%, a 2% profit margin, and a return on equity equal to 17%. What is the company's total assets

bezimeni [28]

Answer:

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The company's total assets turnover is 5.5

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3 years ago