Lara Technologies is considering a total cash outlay of $250,000 for the purchase of land, which it could lease for $35,000 per
1 answer:
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Answer:
6.52%
Explanation:
For computing the nominal yield to call, first we have to find out the present value by applying the present value formula which is shown in the attachment below:
Future value = $1,000
Rate of interest = 6.50% ÷ 2 = 3.25%
NPER = 15 years × 2 = 30 years
PMT = $1,000 × 8.25% ÷ 2 = $41.25
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value is $1,166.09
Now to determine the yield to call we use the RATE formula that is shown in the attachment below:
Present value = $1,166.09
Future value or Face value = $1,120
PMT = $1,000 × 8.25% ÷ 2 = $41.25
NPER = 6 years × 2 = 12 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this, the bond nominal yield to call is
= 3.26% × 2 years
= 6.52%
Answer:
b. In the first economy, the spending multiplier is greater than in the second economy. In the third economy, the spending multiplier is undefined
Explanation:
This can be easily understood by going through some calculations in a spending multiplier formula.
WORKINGS
The formula for Spending Multiplier =
Spending Multiplier
Economy 1: Multiplier = = 2
Economy 2: Multiplier = = 1
Economy 3: Multiplier = = undefined
Note: MPS can be abbreviated as Marginal propensity to save
As we can see here economy 1 is 50% greater than economy 2 and economy 3 is undefined because they spend whole dollar they earn additionally.
On behalf of the above calculations, option B is a perfect match!