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Ket [755]
3 years ago
7

James Corporation is planning to issue bonds with a face value of $502,500 and a coupon rate of 6 percent. The bonds mature in 7

years and pay interest semiannually every June 30 and December 31. All of the bonds will be sold on January 1 of this year.
Required: Compute the issue (sale) price on January 1 of this year for each of the following independent cases:

a. Case A: Market interest rate (annual): 4 percent.
b. Case B: Market interest rate (annual): 6 percent.
c. Case C: Market interest rate (annual): 8.5 percent.
Business
1 answer:
sweet-ann [11.9K]3 years ago
7 0

Answer:

a.

Bond Price  = $563,333.90007 rounded off to $563,333.90

b.

Bond Price  = $502500

c.

Bond Price  = $437232.16025 rounded off to $437232.16

Explanation:

To calculate the quote/price of the bond today, which is the present value of the bond, we will use the formula for the price of the bond. As the bond is a semi annual bond, we will use the semi annual coupon payment, semi annual number of periods and semi annual YTM. The formula to calculate the price of the bonds today is attached.

a. Case A: Market interest rate (annual): 4 percent

Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075

Total periods remaining (n) = 7 * 2 = 14

r or YTM = 4% * 6/12  =  0.02 or 2%    

 

Bond Price = 15075 * [( 1 - (1+0.02)^-14) / 0.02]  + 502500 / (1+0.02)^14

Bond Price  = $563,333.90007 rounded off to $563,333.90

 

b. Case B: Market interest rate (annual): 6 percent

Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075

Total periods remaining (n) = 7 * 2 = 14

r or YTM = 6% * 6/12  =  0.03 or 3%    

 

Bond Price = 15075 * [( 1 - (1+0.03)^-14) / 0.03]  + 502500 / (1+0.03)^14

Bond Price  = $502500

c. Case C: Market interest rate (annual): 8.5 percent.

Coupon Payment (C) = 502500 * 0.06 * 6/12 = $15075

Total periods remaining (n) = 7 * 2 = 14

r or YTM = 8.5% * 6/12  =  0.0425 or 4.25%    

 

Bond Price = 15075 * [( 1 - (1+0.0425)^-14) / 0.0425] + 502500/(1+0.0425)^14

Bond Price  = $437232.16025 rounded off to $437232.16

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When looking at developing a particular residential project in a market, the most important factors in figuring out the market a
wlad13 [49]

Answer: employment opportunities and commuting ranges.

Explanation:

When looking at developing a particular residential project in a market, the most important factors in figuring out the market area are employment opportunities and commuting ranges.

One should look at the employment opportunities that such project will bring as this is vital to improving the standard of living of the people in the area. One should also look at the commuting ranges as that is vital too.

3 0
3 years ago
Suppose you are going to receive $13,200 per year for five years. The appropriate interest rate is 8.1 percent.
sertanlavr [38]

Answer:

a-1) Pv = 52549

a-2) Pv = 56822

b-1) Fv = 77570

b-2 Fv = 83878

Explanation:

b-1) Future value:

S= Sum of amount of annuity=?

n=number of fixed periods=5 years

R=Fixed regular payments=13200

i=Compound interest rate= .081 (suppose annualy)

we know that ordinary  annuity:

S= R [(1+i)∧n-1)]/i

   = 13200[(1+.081)∧5-1]/.081

    =13200(1.476-1)/.081

    = 13200 * 5.8765

  S  = 77570

a.1)Present value of ordinary annuity:

Formula: Present value = C* [(1-(1+i)∧-n)]/i

                                  =13200 * [(1-(1+.081)∧-5]/.081

                                 =13200 * (1-.6774)/.081

                                =13200 * (.3225/.081)

                                =52549

a.2)Present value of ordinary Due:

Formula : Present value = C * [(1-(1+i)∧-n)]/i   *  (1+i)

                                    =  13200 * [(1- (1+.081)∧-5)/.081   * (1+.081)

                                 = 13200  * 3.9822 *  1.081

                               =  56822

b-2) Future value=?

we know that:         S= R [(1+i)∧n+1)-1]/i ]  -R

                             = 13200[ [ (1+.081)∧  5+1 ]-1/.081]   - 13200

                           = 13200 (.5957/.081)   -13200

                         = (13200 * 7.3544)-13200

                         = 97078  -  13200

                       =  83878

5 0
3 years ago
Suppose that you are a systems analyst on a project that involves modifying the sales order process. Since your company receives
mina [271]

Answer:

Sample size = 384.16 ≈ 385

If we increase the order size to 25,000, there will be no change in the sample size as sample size is independent of the number of orders

Explanation:

Data provided in the question:

Number of sales order received  per day = 2500

Confidence level = 95%

Certainty factor for 95% certainty = 1.96

Now,

Sample size = 0.25\times(\frac{\textup{Certainty factor}}{\textup{1 -Desired accuracy}})^2

on substituting the respective values, we get

Sample size = 0.25\times(\frac{\textup{1.96}}{\textup{1 - 0.95}})^2

or

Sample size = 384.16 ≈ 385

If we increase the order size to 25,000, there will be no change in the sample size as sample size is independent of the number of orders

3 0
3 years ago
There is no evidence that giving (blank) to your children makes them hyperactive.
tatiyna
I think its Sugar because that usually what people are talking about when dealing with children.
6 0
3 years ago
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If a frozen pizza plant is the cost object, classify each of the following costs as direct or indirect, respectively: property i
emmainna [20.7K]

Answer:

Indirect

Direct

Iindirect

Explanation:

Direct cost is the cost that can be traced back to the cost object whereas the indirect cost cannot be traced back. Cost object is something to which the costs are assigned. in this case the cafeteria workers are directly working with the cost object:Frozen pizza plant, hence the cost is directly associated with that. Janitorial supplies and property insurance cost does not directly relate to The cost object given here so it will be classified as indirect cost.

3 0
3 years ago
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