1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
yaroslaw [1]
3 years ago
11

A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. In

terest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,060. Further assume Ms. Bright paid 40 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan.
a. What is the current price of the bond? (Input answer to 2 decimal places.)
b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round answer to 2 decimal places.)c. How much of the purchase price of $1,060 did Ms. Bright pay in cash? (Do not round intermediate calculations and round answer to 2 decimal places.)
Business
2 answers:
natita [175]3 years ago
8 0

Answer:

a) $1,153.72

b) $93.72

c) $424

Explanation:

Given:

Original bond was issued at 12%

YTM = 10%

Years left, N = 15 years.

a) The current price of bond:

Using Excel function, we have:

=PV(10%/2,2*15,-12%*1000/2,-1000)

= $1153.72

The current price of bond is $1,153.72

b) Dollar profit based on bond's current price will be calculated as:

Bond's current price - purchase price

= $1,153.72 - $1,060

= $93.72

Dollar profit = $93.72

c) The purchase price of $1,060 Ms. Bright paid in cash will be:

$1,060 * 40%

= $424

cricket20 [7]3 years ago
5 0

Answer:

A.) $1,152.12

B.) $92.12

C.) $424.00

Explanation:

Given

period (t) = 15 years

Coupon rate = 12%

Rate (r) = 10%

Par value = $1000

Purchase price = $1060

A.) Current price of bond :

Price = Coupon payment × [(1 - (1 + r)^-t) /r] + [par value / (1+r)^t]

Coupon payment = 12% × 1000 = $120

Plugging our values

Price = 120 × [(1-(1+0.1)^-15)/0.1] + [1000/1.1^15]

Price = $1,152.12

B.) Dollar profit on bond

Dollar profit = Current price - Purchase price

Dollar profit = $1,152.12 - $1060 = $92.12

C.)Amount paid in cash

40% of purchase amount was paid in cash

0.4 × 1060 = $424.00

You might be interested in
In what situations is top-down planning likely to be superior to bottom-up emergent strategy development
Marianna [84]

Answer is given below :

Explanation:

  • Both strategies aim to convey and process knowledge between and within the organization. The top-down approach for sub-categories to gain insights at the senior management level breaks down a system.
  • This is a great tool to help managers identify areas of improvement using quota and monthly matrix goals. There are flaws in this strategy, employees are not involved in the process and managers do not understand the full impact of the changes made.
  • Morality can be affected because this strategy is motivated by fear and encouragement. The bottom line is that in some cases it is more complex, although employees feel motivated to provide more authority and quality work. The information is processed to a minimum and communicated to management.
  • This may help in some areas because administrators may not fully understand the process. I should use the military as an example for a top down strategy.
  • It works on the battlefield when there is no time to discuss or motivate employees. Top down is used when there is a slight change in environmental factors.
5 0
3 years ago
Peyton sells an office building and the associated land on May 1 of the current year. Under the terms of the sales contract, Pey
Westkost [7]

Answer:

$2,466,000

Explanation:

Given that,

Cash Received = $1,600,000

Mortgage assume by purchaser = $950,000

Broker's commission = $75,000

points paid by seller = $9,000

Peyton's amount realized:

= Cash Received + Mortgage assume by purchaser - broker's commission - points paid by seller

= $1,600,000 + $950,000 - $75,000 - $9,000

= $2,466,000

Therefore, the amount realized by Peyton is $2,466,000.

4 0
3 years ago
What are the opportunity costs of going to the gym for a workout rather than studying for an economics test?
NARA [144]

Answer:

see below

Explanation:

Opportunity cost is the value of the forfeited benefits as a result of making a decision in a certain way. Decision making involves choosing one item over others. The cost or value of the option not chosen is the opportunity cost. The value of the forfeited option is the opportunity cost.

In choosing to go to the gym, the forgone activity is studying for the economic exam. The benefits associated with studying for the economic test is the opportunity cost. The value attached to the economic test, such as good grades, passing the test,  or any reward arising from studying for the test, is the forfeited benefit and hence the opportunity cost.

6 0
3 years ago
On July 15, 2021, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $750,000 and $325,000, respecti
cupoosta [38]

Answer:

Journal entry to record the Sale of Patent

Debit : Cash $750,000

Credit : Patent at Book Value $120,000

Credit : Profit and Loss $630,000

Journal entry to record the Sale of Equipment

Debit : Cash $325,000

Debit : Profit and loss $75,000

Debit : Accumulated depreciation $150,000

Credit : Equipment at Cost $550,000

Explanation:

During a sale transaction the entity recognizes 1. The Cash Proceeds resulting from the sale, 2. The Profit or loss resulting from the sale, 3.The entity derecognizes the Cost or Book Value of the Asset as well as the Accumulated depreciation.

A profit of $630,000 has been earned as a result of the sale of the Patent, whereas a loss of $75,000 has been incurred as a result of sale of Equipment.

8 0
3 years ago
When industries are limited by the size of the domestic market, opening trade to the world markets will likely lead to ________
kari74 [83]

Answer: c) economies of scale; increase

Explanation:

When industries are limited by the size of the domestic market, opening trade to the world markets will likely lead to economies of scale and increase real GDP per capita in the domestic country.

When this industry choose to break out of this limitation placed on them due to the small size of market in their country, the idea of opening trade to the world market would lead to reduction in production costs since they now have a larger market (and thus produce more). Also, the real GDP per capita in the domestic country should increase since the company in this domestic nation has expanded its production to the world market.

NOTE:

Economies of scale occur when the cost of production is now reduced because there is an increase in a company's production.

4 0
3 years ago
Other questions:
  • When Drafting The Bio Section Of A Social Profile, Keep In Mind That Only The First ____________ Will Appear To Customers In Sea
    6·1 answer
  • Why is a free rider a type of market failure?
    15·1 answer
  • Advancements in medical technology often lead to new careers.<br><br> True<br> False
    10·2 answers
  • A married customer who has an individual account dies. The broker who handles the account learns that one of the major holdings
    15·1 answer
  • Which of the following statements accurately describes the economic policy of mercantilism?
    10·1 answer
  • For each of the following businesses. what is the likely fixed factor of production that defines the short run?a. Golf courseb. M
    5·1 answer
  • Once Domino's decided to offer salads, it partnered with "Ready pac foods" to offer each Domino’s Pizza location prepackaged sal
    15·1 answer
  • Adam Company sells one product at a price of $50 per unit. Variable expenses are 40 percent of sales, and fixed expenses are $50
    11·1 answer
  • Which option correctly describes a benefit of using professional networking websites? OA Reach out to friends and relatives for
    8·1 answer
  • A work group _______ may be defined as a standard that is shared by group members and that regulates member behavior within an o
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!