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denis23 [38]
3 years ago
11

An FI purchases at par value a $100,000 Treasury bond paying 10 percent interest with a 7.5 year duration. If interest rates ris

e by 4 percent, calculate the bond's new value. Recall that Treasury bonds pay interest semiannually. Use the modified duration valuation equation.
Business
1 answer:
puteri [66]3 years ago
3 0

Answer:

The bond's new value is $70,000

Explanation:

First calculate the percentage change in the value of the bond

Duration = Percentage change in price / Percentage change in yield

Percentage change in price = Duration x Percentage change in yield

where

Duration = 7.5 years

Percentage change in yield = 4%

Percentage change in price = ?

Placing value sin the formula

Percentage change in price = 7.5 x 4%

Percentage change in price = 0.30

Percentage change in price = 30%

As we know that the value of the bond and the yield rate are inversely proportional to each other, If the yield rate increases the value of the bond decreases due to the discounting factor used in the valuation o the bond.

Hence, the value of the bond is calculated as follow

Value of the bond = Par value of the bond x ( 1 - per centage of change in the price of the bond

Value of the bond = $100,000 x ( 1 - 30% )

Value of the bond = $100,000 x 0.70

Value of the bond = $70,000

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Curtain Co. paid dividends of $12,000; $17,000; and $18,000 during Year 1, Year 2, and Year 3, respectively. The company had 2,3
Bezzdna [24]

Answer:

$2,150

Explanation:

Annual cumulative preferred stock dividend = 2,300 × $100 × 6.5% = $14,950

Cumulative preferred stock dividend carried forward to year 2 = $14,950 - $12,000 = $2,950

Cumulative preferred stock dividend payable in year 2 = $14,950 + $2,950 = $17,900

Cumulative preferred stock dividend carried forward to year 3 = $17,900 - $17,000 = $900

Cumulative preferred stock dividend payable in year 3 = $14,950 + $900 =  $15,850

Dividend received by common shareholders during Year 3 = $18,000 - $15,850 = $2,150

3 0
3 years ago
Compare your results to the industry ratios and describe what NMC should do to improve its position in the market.
docker41 [41]

Answer:

sorry need points ok.

Explanation:

sorry talaga ha

pero wag kayong magalit

  1. ayaw kasuko
  2. wag kang magalit
  3. never angry

7 0
3 years ago
Six months after starting a quilting business with a partner, Penny finds that actual revenues are significantly lower than proj
pychu [463]

Answer:

escalation of commitment

Explanation:

Penny invest into the business additional funds ignoring the expected outcome of the business (the future returns are not expected to increase)

Penny is not doing the proper analysis of the past six month

The invested funds, time and other resources should not be considered they are sunk cost. The 50,000 will increase the losses not cut them as the return are not going to improve. Additional funds should be invested when there is a financial need due to other project which required more lverage and not to make up for revenues falling behind budget

Penny avoids to acknowle the true fact of the business.

5 0
3 years ago
Read 2 more answers
The Astro World amusement park has the opportunity to expand its size nowâ (the end of yearâ 0) by purchasing adjacent property
STatiana [176]

Answer:

Percent increase as a result of expansion = 30%

Price of admission = $35

Cashflow attributable to the park's expansion = Estimated attendance without expansion * percent increase as a result of expansion * admission fee - additional operating costs per year.

Year 1

= 31,000 * 30% * 35 - 100,000

= $225,500

Year 2

= 35,000 * 30% * 35 - 100,000

= $267,500

Year 3

= 36,750 * 30% * 40 - 100,000

= $341,000

Year 4

= 38,500 * 30% * 40 - 100,000

= $362,000

Year 5

= 42,000 * 30% * 40 - 100,000

= $404,000

6 0
3 years ago
Hunter Manufacturing Inc.'s December 31, 2014 balance sheet showed total common equity of $2,050,000 and 190,000 shares of stock
Nesterboy [21]

Answer:

11.57 is the book value per share.

Explanation:

Given: Total common equity= $2050000.

           Total number of outstanding shares= 190000

            Net Income= $250000

            Dividend paid out= $100000.

We know the formula for finding book value per share at 12/31/2015.

Book value per share= \frac{(Total\ equity+ Accumulated\ earnings)}{ number\ of\ outstanding\ shares}

First, lets find out accumulated earning.

Accumulated earning= Net\ income- Dividend\ paid

Accumulated earning= \$ 250000 - \$ 100000= \$ 150000

∴Accumulated earning= $ 150000.

Now, Book value per share= \frac{\$ 2,050,000+ \$ 150000 }{\$ 190000}

⇒ Book value per share= \frac{2200000}{190000} = \$ 11.57

∴ Book value per share= $11.57.

8 0
3 years ago
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