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Marta_Voda [28]
3 years ago
10

Fill in the missing information. Your broker faxed to you the following information about two semiannual coupon bonds that you a

re considering as a potential investment.â Unfortunately, your fax machine is blurring some of theâ items, and all you can read from the fax on the two different bonds is theâ following:
Features IBM Coupon Bond AOL Coupon Bond
Face value (Par) $5,000 $5,000
Coupon Rate 9.5% ?
Yield to maturity 6.5% 5.5%
Years to maturity 15 30
Price ? $8,302.28
Business
1 answer:
zysi [14]3 years ago
6 0

Answer:

Filling the missing information:

Features          IBM Coupon Bond    AOL Coupon Bond

Face value (Par)           $5,000                     $5,000

Coupon Rate                     9.5%                      12.8%

Yield to maturity                6.5%                       5.5%

Years to maturity              15                           30

Price                            $6,410.40                  $8,302.28

Explanation:

a) Data and Calculations:

Features          IBM Coupon Bond    AOL Coupon Bond

Face value (Par)           $5,000                     $5,000

Coupon Rate                     9.5%                              ?

Yield to maturity                6.5%                       5.5%

Years to maturity              15                           30

Price                                    ?                        $8,302.28

Features          IBM Coupon Bond    AOL Coupon Bond

Face value (Par)           $5,000                     $5,000

Coupon Rate                     9.5%                      12.8% ($640/$5,000 * 100)

Yield to maturity                6.5%                       5.5%

Years to maturity              15                           30

Price                            $6,410.40                  $8,302.28

Price of IBM Coupon Bond:

N (# of periods)  15

I/Y (Interest per year)  6.5

PMT (Periodic Payment)  475

FV (Future Value)  5000

Results

PV = $6,410.40

Sum of all periodic payments $7,125.00

Total Interest $5,714.60

Coupon interest rate of AOL Bond:

N (# of periods)  30

I/Y (Interest per year)  5.5

PV (Present Value)  8302.28

FV (Future Value)  5000

Results

PMT = $640.27

Sum of all periodic payments $-19,208.06

Total Interest $5,905.78

Coupon interest rate = 12.8% ($640/$5,000 * 100)

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Dividends at FSL are expected grow at a rate of negative 5.4% per year (the dividends are getting smaller). The stock just paid
Crank

Answer:

$21.37

Explanation:

g = -5.4%

D0 = $3.93

D1 = D0 (1+g)

D1 = 3.93*(1-0.054)

D1 = 3.93*0.946

D1 = 3.71778

Investors require a return (ke) of 12%

P0 = D1/(ke - g)

P0 = 3.71778 / (12% - (-5.4%)

P0 = 3.71778 / (12% + 5.4%)

P0 = 3.71778 / 17.4%

P0 = 3.71778 / 0.174

P0 = 21.3665517

P0 = $21.37

So, the expected price of the stock next year is $21.37.

5 0
3 years ago
An individual who has left his or her native country and is unwilling or unable to return to it because of persecution or fear o
viva [34]

Answer: A Refugee

Explanation:

A Refugee is an individual who has left his native country and crossed into another country, due to conflict or war in their native land. In most cases, refugees are unable to return to their native country and would have to start life afresh in the new country.

5 0
2 years ago
For an average commercial vehicle being driven at 55 mph on dry pavement, it will take about _____ to bring the vehicle to a sto
zalisa [80]
Answer: 300 feet

Explanation:
Three important factors are involved in bringing a moving vehicle to a stop.

1. Perception distance is the distance a vehicle travels while your brain perceives the need to apply the brakes. An alert driver requires about 0.75 seconds to react. This time accounts for about 60 feet of travel.

2. Reaction distance is the distance traveled before the driver actually presses on the brake pedal. For an alert driver, this also takes about 0.75 seconds. This adds another 60 feet of travel.

3. Braking distance is the distance the vehicle travels before coming to a stop on a dry ground. On a slippery ground (after snow or rain) this distance is longer. On dry ground, the skidding distance is about 170 feet.

This means that an alert driver needs 60+60+170 = 290 feet (approximately 300 feet) to stop.
For this reason, tailgating at high driving speeds is dangerous.

7 0
3 years ago
Which of the following is an inconsistency of using market multiples to determine value? A) Using a market multiple assumes that
VikaD [51]

Answer:

B) Using a market multiple assumes that the target company is mispriced, while comparable companies are correctly priced.

Explanation:

Market Multiple, also known as trading multiples, is used to compare two financial measures, to determine the value of a company. It is another name for Price to Earnings Ratio (also called P/E Ratio).

Using the market multiple approach, investors can determine whether stocks in their portfolios will increase or decrease in price through the next term. Investors may then buy or sell stocks in order to maximize their expected gains calculated.

6 0
3 years ago
ou wish to retire in 20 years, at which time you want to have accumulated enough money to receive an annual annuity of $32,000 f
AleksAgata [21]

Answer:

Annual contributions to the retirement fund will be $6,347.31

Explanation:

First find the Present Value of the Annuity giving payments of $32,000 annually for 25 years at the rate of 10%.

Using a Financial Calculator enter the following data

PMT = $32,000

P/y = 1

N = 25

R =  10%

FV = 0

Thus, the Present Value, PV is $290,465.28

At the time of retirement (in 20 years time) the Value of the annuity fund is $290,465.28.

Next we need to find the Payments PMT to reach this amount in 20 years time at the interest rate of 8%

Using a Financial Calculator enter the following data

FV = $290,465.28

N = 20

R = 8 %

PV = $0

Thus, the Payments, PMT required will be $6,347.3080

Conclusion :

Annual contributions to the retirement fund will be $6,347.31

3 0
3 years ago
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