A bond with an annual coupon rate of 4.8% sells for $970. what is the bond’s current yield?
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Answer:
Part A) The percentage increase was
Part B) Michael is financially better off this year than last year
Step-by-step explanation:
Part A)
we know that
Using proportion
Let
x-----> the percentage increase
Part B) Compare the percentage increase with the inflation
The percentage increase is greater than the inflation
therefore
Michael is financially better off this year than last year
What we should do is create a set of 15 data.
To comply with the mean and median 59, what we will do is make our center point 59, we will add 7 values backwards and 7 values forward, always the same value adding in the case forward or subtracting in the case of backwards the same number so that the mean is not affected
So:
We will add 2.5 in the same proportion, we start with the forward ones:
59 + 2.5 * 1 = 61.5
59 + 2.5 * 2 = 64
59 + 2.5 * 3 = 66.5
59 + 2.5 * 4 = 69
59 + 2.5 * 5 = 71.5
59 + 2.5 * 6 = 74
59 + 2.5 * 7 = 76.5
Backward:
59 - 2.5 * 7 = 41.5
59 - 2.5 * 6 = 44
59 - 2.5 * 5 = 46.5
59 - 2.5 * 4 = 49
59 - 2.5 * 3 = 51.5
59 - 2.5 * 2 = 254
59 - 2.5 * 1 = 56.5
Therefore, the entire data set would be:
41.5, 44, 46.5, 49, 51.5, 54, 56.5, 59, 61.5, 64, 66.5, 69, 71.5, 74, 76.5
We guarantee the mean and median 59.
The standard deviation is equal to 10.8
Now if we change the first value of 41.5 by 1000, we will see what happens:
New dataset:
1000, 44, 46.5, 49, 51.5, 54, 56.5, 59, 61.5, 64, 66.5, 69, 71.5, 74, 76.5
The mean changes to 122.9
And the standard deviation to 234.62
In other words, there is a significant increase in the mean, but in the standard deviation the growth is abysmal.
I attach an excel to check all this data.
