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viktelen [127]
3 years ago
13

Bond J has a coupon rate of 5 percent and Bond K has a coupon rate of 11 percent. Both bonds have 14 years to maturity, make sem

iannual payments, and have a YTM of 8 percent. a. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds?
Business
1 answer:
rusak2 [61]3 years ago
4 0

Answer:

Bond J -16.33%

Bond K -14.04%

Explanation:

In order to determine the percentage price change it is incumbent to establish the bonds' prices with YTM of 8% as well as when interest rises by 2% so as to calculate the price change percentage.

The pv formula can be used to establish the prices as follows:

=-pv(rate,nper,pmt,fv)

rate is semiannual yield to maturity of both bonds which 8%/2=4%

nper is the number of coupon interest payable by the bonds which 14 years multiplied by 2 i.e 28

pmt is the semiannual coupon payment by the bonds:

Bond J=$1000*5%/2=$25

Bond K=$1000*11%/2=$55

fv is the face of the bonds which is $1000 in  both cases

Price of bond J;

=-pv(4%,28,25,1000)=$ 750.05  

Price of Bond K:

=-pv(4%,28,55,1000)=$1,249.95  

New price with 2% increase in interest

Yield previously 8%

plus increase      2%'

total                     10%

divided by 2=10%/2=5%

Price of bond J;

=-pv(5%,28,25,1000)=$627.55  

Price of Bond K:

=-pv(5%,28,55,1000)=$ 1,074.49  

Change in price=new price-old price/old price

Bond J=($627.55-$ 750.05)/$ 750.05=-16.33%

Bonk K=($1,074.49-$1,249.95)/$1,249.95  =-14.04%

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Answer:

Example of not a natural experiment an economist might use to evaluate a theory is:

C. Here the Students in a microeconomics principles course are advised to play a game with their classmates to determine and evaluate what all decisions they make under certain adjusted circumstances.

Explanation:

Natural experiment : A natural experiment is referred to an observational and also an empirical study in which we get to study about the experimental and controllable varieties of variables. which can not het manipulated anywhere by the researchers.

Instead these experiments are allowed to affect the environment and the nature or the different factors which are not under control of our researchers. In contrast to the experimental values and all the natural experiments are even not controlled by the researchers but instead they also admire and obseve those experiments for their own studies.

So, the right option is:

C. Here the Students in a microeconomics principles course are advised to play a game with their classmates to determine and evaluate what all decisions they make under certain adjusted circumstances.

7 0
3 years ago
The use of capital in the production process ______.
Ray Of Light [21]

Answer:

The correct answer is letter "D": improves efficiency, increases output, and provides for growth.

Explanation:

In general, capital refers to financial resources. Capital includes financial assets used in manufacturing, as well as the machinery and equipment businesses. Investors purchase stocks or mutual funds using capital. Companies raise capital from a bond or stock sales to fund their operations. Although capital may be cash or currency, it is not the same as money.

<em>While talking about production, capital allows firms to hire qualified personnel that improves the company's efficiency which is likely to increase production or improve the quality of the output. Eventually, both an increase in efficiency and output contributes to the growth of an institution in the form of more profits.</em>

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3 years ago
Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of 8,638. The
mina [271]

Answer:

Net Pay = Gross Pay - Federal Income Tax - FICA-SS Tax - FICA-Medicare Tax

Net Pay = $8,260.00 - $1,325.17- $512.12 - $119.77* = $6,302.94

Explanation:

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3 years ago
Franklin Aerospace has a quick ratio of 2.00x, $38,250 in cash, $21,250 in accounts receivable, some inventory, total current as
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Answer:

Over the past year, the company sold and replaced its inventory 31.37x

Explanation:

In order to calculate how often did Franklin Aerospace sell and replace its inventory we would have to calculate first the inventory with the following formula:

Current assets=cash+inventory+account receivables

inventory=Current assets-cash-account receivables

inventory=$85,000-$38,250-$21,250

inventory=$25,500

So, to calculate how often did Franklin Aerospace sell and replace its inventory we would have to calculate the Inventory turnover ratio as follows:

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Inventory turnover ratio=$800,000/$25,500

Inventory turnover ratio=31.37x

Therefore, over the past year, the company sold and replaced its inventory 31.37x

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Which of the following best describes horizontal analysis? comparing financial statement amounts from year to year for the same
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Answer:

Comparing financial statement amounts from year to year for the same company

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When you carry out a horizontal analysis of the financial statements of a corporation you compare how the different accounts have changed over a period of time.

For example, you can perform a horizontal analysis to determine how total costs affect net profits in the income statement. You take the 2017, 2018 and 2019 income statements and compare how total costs have evolved during that period or time, and what percentage do they represent of total revenue.

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