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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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A. efficiency is increased
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Suppose that GDP is $10,000, Consumption is $6,000, and Government spending is $1,500 with a deficit of $200. (Assume net export
Marta_Voda [28]

Answer:

private saving = $2700

Explanation:

given data

GDP = $10,000

Consumption = $6,000

Government spending = $1,500

deficit = $200

solution

we know here equation of GDP that is express as

GDP = Consumption + investment + Government spending   ...................1

we consider here tax revenue that is = T

T - Government spending = - deficit

T = Government spending - deficit

T = $1500 - $200

T = $1300

so we can say from equation 1

( GDP - Consumption - T ) + ( T - Government spending ) = investment

and investment = private saving + public saving

so private saving will be

private saving = GDP - Consumption - tax revenue  ................2

private saving = $10000 - $6000 - $1300

private saving = $2700

8 0
3 years ago
A disadvantage of the line structure is that it
Ivahew [28]

Answer:

Disadvantages of a Line Organization

A line organization can suffer from a lack of specialization. This is because each department manager is concerned only with the activities of his own department. Therefore, employees are skilled in tasks pertaining to their departments alone.

These organizations can overburden a keyman or a few key-men to the extent of their breaking point. Also, in the absence of a staff aid, if a strong man seizes the organization, he can run it arbitrarily. Such arbitrary power can lead to a considerable damage to the organization.

Such organizations usually suffer from a lack of expert advice. If the line manager has trouble making a decision, there is no expert staff that he can turn to.

A line organization is usually rigid and inflexible. In fact, such organizations maintain discipline so rigorously that they can rarely change.

These organizations are based on the autocratic system of management.

The division of work is not based on any scientific plan but on the whims of the manager.

It might stop progress and prevent the unit to work effectively.

Such organizations might also encourage nepotism or favoritism based on relationship or friendship.

I hope this is helpful information.

8 0
3 years ago
You are working on the toll plaza construction phase of the Grand Harbor Tunnel project. You notice that the concrete being pour
Radda [10]

Answer:

Discuss the concerns you have with the supervisor in charge.

Explanation:

It is wrong under the ethics code to ignore a clear sign that an intervention is required be it in business decision making or in this case, construction. It is your obligation to report any abnormality noticed to the supervisor in charge.

4 0
3 years ago
You expect KT Industries (KTI) will have earnings per share of $5 this year and expect that they will pay out $1.25 of these ear
sleet_krkn [62]

Answer:

9.75%

Explanation:

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Therefore, the expected growth rate for KTI's dividend is closest to 9.75%

7 0
3 years ago
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