Answer:
C. The required rate of return exceeds the coupon value, so the bonds sells at a premium
Explanation:
<em>The required return on a bond = Yield to maturity (Current Market interest rate) * Bond Par value.</em>
<em>Coupon return = Coupon rate of bond * Par value of bond.</em>
There are two types of returns on bonds-
<em>(1) Required rate of return (Yield to maturity related)</em>
<em>(2) Return from capital gain</em>
If the Yield to maturity (YTM) related return is higher than the coupon return, then return from capital gain will be negative i.e. there will be a capital loss, so the bond will trade below par value (at discount).
If the Yield to maturity (YTM) related return is lower than the coupon return, then return from capital gain will be positive i.e. there will be a capital gain, so the bond will trade above par value (at premium).
Hence, the required return rate (YTM related) and return from capital gain, both <em>cancel out each other</em> in a bond.
So, following the concept only option<em> (c) - the </em>required rate of return exceeds the coupon value, so the bonds sells at a premium is not a reason of <em>why the required return on a bond may differ form its par value.</em>
Answer:
PV = $8,719.322
PV= $87,600.88
Explanation:
Calculation for how much do you have to invest today If you can earn an annual return of 11.38 percent
Using this formula
PV = FV / (1 +r)t
Let plug in the formula
PV = $1,000,000 / (1.1138)^44
PV=$1,000,000/114.7878460565
PV = $8,719.322
Therefore If you can earn an annual return of 11.38 percent the amount you have to invest today will be $8,719.322
Calculation for if you can earn 5.69 percent
PV = $1,000,000 / (1.0569)^44
PV =$1,000,000/11.41540982272
PV= $87,600.88
Therefore If you can earn an annual return of 5.69 percent the amount you have to invest today will be $87,600.88
Answer:
Market- value Balance sheet
ASSETS
NON-CURRENT ASSETS $37,628
CURRENT ASSETS $11,274
TOTAL ASSETS $48,908
EQUITY AND LIABILITIES
EQUITY (316.6*$103.39)=32,733.274 $32,733
LIABILITIES
NON-CURRENT $10,419
CURRENT LIABILITIES $5,750
TOTAL EQUITY AND LIABILITIES $48,908
Explanation:
b) Assets are extra by ($37,628.274 - $22,293) =$15335.27
Answer:
d. Producers, who earn a higher price on the sale of each unit and also sell more units, thereby unambiguously earning higher revenues
Explanation:
A government price support program is when the government impose a price limit on a product to control the price of the product i.e price floor, and also the purchase of any surplus. The price floor and the purchase of any surplus for the product encourages the producers to produce more of the product.
Since price floor must be higher than the equilibrium price for it to be effective, the producers of the agricultural product earn more by selling in units and also earn more for selling any surplus to the government.
