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Licemer1 [7]
3 years ago
10

You just learned that a blue chip company will issue a bond with a maturity of 100 years. The bond appears to be a good deal bec

ause it yields 5.78 percent. Assuming that the inflation rate stays at 4.39 ​percent, what is the​ bond's real rate of return​ today? If you are looking for a bond to purchase and hold for several​ years, will you buy this​ bond? Explain your answer in terms of future inflation projections and the length of the​ bond's maturity.
Business
1 answer:
PIT_PIT [208]3 years ago
4 0

Answer:

The bon's real rate of return is 1.39%.

As we know the inflation rate behave same as the bond yield because the bond yield includes the inflation impact.

In case of if there is a increase in the inflation in future. I will not buy this bond, because the price of the bond will fall and as percentage increases the present value of the cash flows also decreases which is the basis used for pricing the bons.

In case of if there is a decrease in the inflation in future, I will buy this bond, because the price of the bond will rise and as percentage decreases the present value of the cash flows also increases which is the basis used for pricing the bons.

Explanation:

Real Rate of return = Nominal rate - Inflation rate

As Bond yield is nominal rate

Real rate of return = 5.78% - 4.39% = 1.39%

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Alex777 [14]
A. It is decreased by 50,000 (I'm 50% sure)
6% of 50,000 is 3,000
3 0
3 years ago
Sheffield Corp. earned $2120 for architecture services provided with the fee to be paid in the future. No entry was made at the
Kay [80]

Answer:  If the fee has not been paid by the end of the accounting period and no adjusting entry is made, this would cause: "d. revenues to be understated.".

Explanation: The income would be underestimated because the income of $2120 that corresponds to the service provided in the accounting period, must be recognized in the accounting period in which the economic events occur regardless of when the income of the funds occurs (accrual principle).

6 0
2 years ago
. If the price elasticity of demand for pineapple is 0.75, a 4% increase in the price of pineapple will lead to a A. 3% decrease
ludmilkaskok [199]

Answer:

A) 3% decrease in the quantity demanded of pineapple.

Explanation:

We know that the demand curve is negative, which means that as price of a product increases, its demand will decrease.

In unitary elasticity(1) the change in demand means that the change in quantity demanded will be the same. A 0.75 elasticity will thus mean that the quantity demanded will change by a factor of 0.75 as compared to the change in price.  

Therefore when the price of pineapple increases by 4%, the quantity demanded will decrease by 4 * 0.75 = 3%

3 0
3 years ago
Read 2 more answers
If the tax multiplier is minus1.5 and a​ $200 billion tax increase is​ implemented, what is the change in​ gdp, holding all else
3241004551 [841]
Tax multiplier = -1.5
Tax increase = $200 billion

Therefore, since the multiplier is a negative value, the GDP must have gone down.

GDP = Tax increase/Tax multiplier  = 200/-1.5 = $133.33 billion decrease.
Then, the correct answer is c.
6 0
3 years ago
New Coffee Company, LLC uses JIT (just-in-time) logistical supply methods. This indicates that the company doesn't really keep l
Leona [35]

Answer:

B) Inventory turnover ratios

Explanation:

Inventory turnover measures how many times a business sells and replaces its merchandise or materials inventory during an accounting period, usually a year.

One of the basic goals of JIT is to lower the total inventories in a company, therefore increasing the inventory turnover ratio. This reduces the company's operating costs.

4 0
3 years ago
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