Answer:
A.) 6.63%
Explanation:
Using a Financial calculator, key in the following inputs to solve for YTM;
Face value of the bond ; FV = 1,000
Price of the bond; PV= 103.3% *1,000 = -1,033
Total duration or time to maturity of the bond; N = 14 years
Use annual coupon rate to find Coupon payment (PMT);
Coupon PMT = coupon rate * Face value
coupon rate = 7% OR 0.07 as a decimal
Coupon PMT = 0.07 *1,000 = 70
Next, with these inputs, press on buttons; CPT I/Y = 6.631%
Therefore, the Pre-tax cost of debt = 6.63%
The answer is the 3rd one.
My explanation would be that the other reasons listed are for personal use such as friends birthdays, music, and a new clock, but the third answer is listing things appropriate for a business.
Hope I helped !
Answer:
Price of the bond is $940.
Explanation:
Price of bond is the present value of future cash flows. This Includes the present value of coupon payment and cash flow on maturity of the bond.
As per Given Data
As the payment are made semiannually, so all value are calculated on semiannual basis.
Coupon payment = 1000 x 11% = $110 annually = $55 semiannually
Number of Payments = n = 11 years x 2 = 22 periods
Yield to maturity = 12% annually = 6% semiannually
To calculate Price of the bond use following formula of Present value of annuity.
Price of the Bond = C x [ ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]
Price of the Bond =$55 x [ ( 1 - ( 1 + 6% )^-22 ) / 6% ] + [ $1,000 / ( 1 + 6% )^22 ]
Price of the Bond = $55 x [ ( 1 - ( 1.06 )^-22 ) / 0.06 ] + [ $1,000 / ( 1.06 )^22 ]
Price of the Bond = $662.29 + $277.5
Price of the Bond = $939.79 = $940
