Union Local School District has bonds outstanding with a coupon rate of 3.3 percent paid semiannually and 15 years to maturity.
The yield to maturity on these bonds is 3.8 percent and the bonds have a par value of $10,000. What is the price of the bonds?
1 answer:
Answer:
The correct answer is $9432.31.
Explanation:
According to the scenario, The given data are as follows:
Par Value (FV) = $10,000
Time Period = 15 years
Time period (Semi annual) (Nper) = 30
Coupon rate ( semi annual) = 3.3% / 2 = 1.65%
So, payment (pmt) = $10,000 × 1.65% = $165
Yield (r) (semiannual) = 3.8% / 2 = 1.9%
By putting the value in financial calculator, we get
Hence, The price of the bond is $9432.31.
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Answer:
1. False
2. Shortage; Larger
Explanation:
1. A binding price ceiling is one that prevents the market from reaching its equilibrium. In this market, the equilibrium price is $25 therefore anything below $25 will be binding. A price ceiling below $25 per box is a binding ceiling.
2<em>. Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result in a </em><em><u>shortage</u></em><em> that is </em><em><u>larger</u></em><em> in the long run than in the short run.</em>
In the long run, supply is more sensitive because farmers can decide to plant oranges on their land, to plant something else, or to sell their land altogether.
This means that a price ceiling in the long run will be less attractive to farmers so they might leave the market. If they do this then the shortage will be more as there are now less supplies in the market.
