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
ser-zykov [4K]
2 years ago
10

Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $4

0. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Business
1 answer:
Savatey [412]2 years ago
5 0

Answer:

$828.36

Explanation:

As for the information provided,

The value = $1,000

Life = 20 years, since interest is semi annual, effective period = 20 \times \frac{12}{6} = 40 periods.

Semi annual interest = $40

Annual interest = 10%, effective interest rate = 5%

Future Value Interest rate = $40 \times (\frac{1}{(1+0.05)^1} +\frac{1}{(1+0.05)^2} +\frac{1}{(1+0.05)^3} +\frac{1}{(1+0.05)^4} +\frac{1}{(1+0.05)^5} +\frac{1}{(1+0.05)^6} +\frac{1}{(1+0.05)^7} +.................. + \frac{1}{(1+0.05)^4^0} )

= $40 \times 17.159 = $686.36

Future Value of Principal = $1,000 \times \frac{1}{(1 + 0.05)^4^0}

= $1,000 \times 0.142 = $142

Thus, current price of bond = $686.36 + $142 = $828.36

You might be interested in
The payment for environmental services (psa) program in costa rica collects payments from the beneficiaries of ecosystem service
MakcuM [25]
<span>According to the means by which environmental services allocate funds to various institutions to fund climate protecting projects, it is clear that the system pays landowners to maintain sustainable practices in their areas and regions, in order to further dwindle the impact of climate change in the modern world.</span>
3 0
3 years ago
Which of these increases the price of certain foreign-made goods?
nexus9112 [7]

An import tariff would increase the price of certain foreign-made goods.

7 0
3 years ago
Read 2 more answers
What are four things a great resume shows employers
Crazy boy [7]

Education, work experience, skills and career objectives.

A resume needs to be a concise, logical and easy to read document that makes an employer want to hire you. Great resumes show potential employers your skills, your career objective, your education and your work or volunteer experience.

5 0
2 years ago
Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90
ikadub [295]

Answer:

Option A, buys dollars to raise the exchange rate, is the right answer.

Explanation:

Option A is correct because when the Fed will buy the dollars then only the demand for dollars will shift rightwards. Consequently, the dollar price or exchange rate will go up. Therefore, the Fed will buy the dollars to increase the exchange rate. In another case, if the Fed wants to decrease the exchange rate then it will sell the dollars, and selling of dollars will shift the supply rightwards. Thus, the exchange rate will fall.

6 0
2 years ago
What is a post secondary student highest fixed expense
Sholpan [36]
Fixed expenses don't change (very often)
The biggest fixed expenses you'll have in college are tuition, room and board, as well as your car payment (if you have one), car insurance premiums (if you have a car), as well as your wireless plan and internet service.
8 0
2 years ago
Other questions:
  • Milton Friedman argues that businesses:
    8·1 answer
  • Forest &amp; Field Company makes and leases a backhoe to Zac. Due to a defect attributable to Forest &amp; Field's negligence, Z
    14·2 answers
  • PNW, LLC purchased equipment, a building, and land for one price of $6,050,500. The estimated fair values of the equipment, buil
    12·1 answer
  • Consumer surplus is: the difference between the price of a product and consumers' valuation of the last unit of the product purc
    12·1 answer
  • Suppose there is a policy debate regarding the United States’ imposing trade restrictions on imported steel rods:
    12·1 answer
  • Dufner Co. issued 15-year bonds one year ago at a coupon rate of 7.1 percent. The bonds make semi-annual payments. If the YTM on
    12·1 answer
  • The Federal Reserve System is __________. ANSWER Unselected the central bank of the United States Unselected also known as the U
    10·1 answer
  • 1.4. Explain the role of financial markets in the economy.​
    6·1 answer
  • Provisions that a party agrees to perform only if the other side also does what it promised are called Group of answer choices c
    10·1 answer
  • Accounting transactions are very important to a firm's operations. Which activity would affect the firm's account balances
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!