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KonstantinChe [14]
3 years ago
12

vA $1,000 three-year par-value bond yields an effective annual interest rate of 6%. Coupons are paid on an annual basis at a rat

e of 5% per year. Determine the modified convexity of the bond
Business
1 answer:
AveGali [126]3 years ago
4 0

Answer:

10.00

Explanation:

We haven = 3

Pv = 1000

Rate if interest = 6%

Coupon = 5% x 1000

= 50

∆y = assumed to be 1%

The formula for convexity =

(V- + V+)-2Vo/Vo+(∆y)²

We first solve for Vo

Using the financial calculator

Vo = 973.26

Then we solve for V-

Pv = 1000

Pmt = 50

I = 5%

n = 3

V- = 1000

We solve for V+

I = 7%

Pmt = 50

N = 3

V+ = 947.51

Then the convexity is gotten by putting these values into the formula

= (1000+947.51)-2x973.26/973.26x(1%)²this is approximately

10

Please check attachment for more details

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The concept of ________ suggests that when a company has built significant value into its product offerings, trying to increase
Vinvika [58]

Answer:

diminishing returns

Explanation:

I'll provide you with a situation as an example.

Let's say that you are running a successful ice cream company. Typically, ice creams are made with dairy. This made a certain percentage of population couldn't consume it since they are lactose intolerant. (Basically eating dairy will give them diarrhea ).

There are not many people who have this condition. Let's say that you want to increase the value of your product and use the materials that makes your product become consumable to this specific population while maintaining the original taste.

This would resulted in a small amount  increase in customers base , but the investment that you need to make in order to make it happen will be substantial. You basically have to invest in researches to find the perfect ingredients, invest in additional marketing expense to educate the customers on the new product, change your current production flow, etc.

5 0
3 years ago
What is the best Honda dirt bike?
Illusion [34]

Answer:

KTM 350 full-size 450s, the 350 remains the bike for the common man. The KTM 350, along with its blood brother the Husqvarna FC350, appeals to the rank-and-file rider who doesn’t want to deal with 60 horsepower. The 350s have steadily improved over their lifespan and are currently better than ever.

Explanation:

7 0
3 years ago
The total amount that you owe for income tax in one year is your tax
Keith_Richards [23]
Yes,yes, it is.

making it longer so i can answer
4 0
3 years ago
A man aged 40 wishes to accumulate a fund for retirement by depositing $1,000 at the beginning of each year for 25 years. Strati
Firdavs [7]

Answer:

The man will made 15 drawins for 31,468 at their retirement age.

Explanation:

We solve for the future value of the annuity-due (deposits at the beginning)

C \times \frac{(1+r)^{time} -1}{rate}(1+r) = FV\\

C 1,000.00

time      25

rate         0.04

1000 \times \frac{(1+0.04)^{-25} -1}{0.04}(1+0.04) = PV\\

FV $375.1168

Now, we calcualte the amount of the withdrawals considering the new rate:

PV \div \frac{1-(1+r)^{-time} }{rate}(1+r) = C\\

375.116802253964 \div \frac{1-(1+0.035)^{-15} }{0.035}(1+0.035) = C\\

C  $ 31.468

7 0
3 years ago
Based on the following information, compute cash flows from investing activities under GAAP.
scZoUnD [109]

Answer:

$240

Explanation:

The computation of the cash flows from investing activities is shown below:

Cash flow from investing activities

Purchased of used equipment -$240

Sale of investment $480

Cash flow provided by investing activities $240

The purchase of used equipment is a cash outflow therefore it is represented in a negative sign while on the other hand sale of investment is cash inflow so the same is presented in a positive sign

5 0
3 years ago
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