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natima [27]
3 years ago
13

A company has among its long-term debt, a bond due in 2015 that carries a face interest rate of 4.65 percent and pays interest a

nnually. Recently this bond sold on the New York Bond Exchange at 103.39. Assume that the company uses the effective interest method to amortize its bonds. Answer the following true/false questions and then select the appropriate multiple choice response. _____ The current market rate of interest on this bond is less than 4.65 percent. _____ The current market rate of the bond affects the amount that the company pays in annual interest. _____ The current market rate of interest affects the amount of interest expense for the current year.
Business
1 answer:
drek231 [11]3 years ago
8 0

Answer:

A company with long-term debt

A. True/false questions:  

1. __TRUE___ The current market rate of interest on this bond is less than 4.65 percent. __FALSE___ The current market rate of the bond affects the amount that the company pays in annual interest. _FALSE____ The current market rate of interest affects the amount of interest expense for the current year.

B. The appropriate multiple choice response:

2. The current market rate of interest on this bond is less than 4.65 percent.

Explanation:

Since the bond is being sold on the New York Bond Exchange at 103.39, it implies that it is selling at a premium.  Therefore, the effective interest rate will be less than the face interest rate of 4.65%.  This is the reason for the bond to be selling at a premium.  That is, it is selling above the face value of 100 per bond.  Conversely, when a bond sells at a discount, say 98 per bond, the effective interest rate will be higher than the face interest rate.  The face interest rate is the stated interest rate while the effective interest rate is the market rate.

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Answer:

5.37%

Explanation:

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We can calculate the company’s after tax return on preferred by using following formula:-

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= 0.06 × (1 - 0.105)

= 0.0537

= 5.37%

We simply applied the above formula to determine the company after tax return

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6 0
1 year ago
The number of births in a population in a certain amount of time is the
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Assume that you purchased a $1,000 perpetual bond (coupon payment is $50) and the interest rate on that bond declined from 5 per
Svetlanka [38]

Answer:

D) all of the above

Explanation:

First find the present value for each alternative  using PV of perpetual cashflow formula;

PV = CF / rate

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If rate= 5%;

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With these two calculations, we see that;

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-at an interest rate of 2%, the speculative demand for money would increase

Hence , all these choices are correct!

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You could spend four years studying at the world's best university, but you would have to keep your attendance there a secret. O
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Answer:

The best future earnings outcome would come from getting the official degree even if you do not attend any classes.

In the labor market, a degree from the world's best university holds great prestige and increases enormously the possibilities of being hired to high-paying jobs. However, you should make sure that you actually take the courses that you are supposed to have learned while "attending".

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