1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Ksivusya [100]
2 years ago
14

Consider the following 4 bonds A B C D:(a) What is the percentage change in the price of each bond if its yields to maturity fal

ls from 6% to 5%
Business
1 answer:
yan [13]2 years ago
8 0

Answer:

Answer is explained and solved in the explanation section below.

Explanation:

Note: This question is not complete and lacks necessary data to solve. But I have found a similar question on internet and will be using its's data to solve this question for the sake of concept and understanding.

Data Missing:

Bonds              Coupon Rates          Maturity

A                              0%                         15 years

B                              0%                          10 years

C                              4%                          15 years

D                               8%                         10 years

Par Value = $1000

Required = % age change in price of bonds, if yields to maturity falls from 6% to 5%.

New YTM = 5%

Old YTM = 6%

For Bond A:

Formula for Old Price = PV(6%, maturity, -annual coupon, -1000)

You need to put this function into Microsoft Excel to solve for old price.

Annual coupon formula = $1000 x coupon rate.

So,

We have,

Maturity = 15 years

Annual Coupon = $1000 x 0% = 0

Old price = PV(6%, maturity, -annual coupon, -1000)

Old price = PV(6%, 15, 0, -1000)

Old Price = $417.27

Now, for new price:

Formula for New Price = PV(5%, maturity, -annual coupon, -1000)

New Price = PV(5%, maturity, -annual coupon, -1000)

New Price = PV(5%, 15, 0, -1000)

New Price = $481.02

Now, we need to find the %age change of bond A.

%age change = (New Price - Old Price) divided by Old Price x 100

%age change = ( $481.02 - $417.27) / ($417.27) x 100

%age change = 15.28%

For bond B:

Old Price = PV(6%, maturity, -annual coupon, -1000)

Maturity = 10 years

Annual Coupon = $1000 x 0% = 0

Old Price = PV(6%, 10, 0, -1000)

Old Price = $558.39

For New Price:

New Price = PV(5%, maturity, -annual coupon, -1000)

New Price = PV(5%, 10, 0, -1000)

New Price = $613.91

%age change = (New Price - Old Price) divided by Old Price x 100

%age change = ( $613.91 - $558.39) / ($558.39) x 100

%age change = 9.94%

For Bond C:

Old Price = PV(6%, maturity, -annual coupon, -1000)

Maturity = 15 years

Annual Coupon = $1000 x 4% = 40

Old Price = PV(6%, 15, -40, -1000)

Old Price = $805.76

New Price = PV(5%, maturity, -annual coupon, -1000)

New Price = PV(5%, 15, -40, -1000)

New Price = $896.20

%age change = (New Price - Old Price) divided by Old Price x 100

%age change =  ( $896.20 - $804.76) / ($805.76) x 100

%age change = 11.23%

For Bond D:

Old Price = PV(6%, maturity, -annual coupon, -1000)

Maturity = 10 years

Annual Coupon = $1000 x 8% = 80

Old Price = PV(6%, 10, -80, -1000)

Old Price = $1,147.20

New Price = PV(5%, maturity, -annual coupon, -1000)

New Price = PV(5%, 10, -80, -1000)

New Price = $1,231.65

%age change = (New Price - Old Price) divided by Old Price x 100

%age change =  ( $1231.65 - $1147.20) / ($1147.20) x 100

%age change = 7.36%

Hence,

% age change of A = 15.28%

% age change of B = 9.94%

% age change of C = 11.23%

% age change of D = 7.36%

   

You might be interested in
While placing his order, a customer tells the waiter to avoid bell peppers of any kind or color in the food since he is allergic
boyakko [2]

<span>An allergic reaction should not be treated lightly because this can actually result in death of the victim. So in this casem this could actually lead to serious illness or death of the customer. Which adds a very huge liability for the restaurant or organization.</span>

4 0
3 years ago
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its mo
Arisa [49]

Answer:

Wingate Company

1. A Contribution Format Income Statement for divisions:

2a. Increase monthly advertising for the West Division by $28,000 to increase its sales by 12%

                                    East          Central        West          Total

Sales                   $412,000  $670,000   $520,000 $1,602,000

Variable exp.         181,280     207,700      166,400      555,380

Contribution

          margin    $230,720    462,300    353,600    1,046,620

Fixed expenses  290,000    332,000     191,000       813,000

Non-Traceable

    Fixed Expenses                                                       338,000

Net operating Income

  (loss)               ($59,280)  $130,300  $162,600   ($104,380)

2b. How much Company's Net Operating Income Increase (Decrease) with the implementation of the above Proposal:

Net operating income before advert = $162,600

Division's net operating income after advert = $160,366

Therefore, the company's net operating loss will increase by $2,234

Explanation:

a) Wingate Company's recent monthly contribution format Income Statement:

Sales                                    $ 1,602,000

Variable expenses                    555,380

Contribution margin               1,046,620

Fixed expenses                        1,151,000

Net operating income (loss) $ (104,380)

b) Division West's Income Statement:

Sales                                 $582,400 ($520,000 x 1.12)

Variable expenses             203,034  ($181,280 x 1.12)

Contribution margin        $379,366

Fixed Expenses                 219,000 ($191,000 + 28,000)

Net Operating Income    $160,366

c) If sales value increases by 12%, the variable expenses will increase proportionately, unless there is an increase in the price, which will ultimately reduce demand, further depressing the sales value.  This is why it is called Variable Cost.  Therefore, a different result will be obtainable if the variable expenses are held constant, contrary to its behavior.

4 0
3 years ago
Why is simple interest useful for planning parts of your financial future? a. simple interest can endure unforeseen economic cha
deff fn [24]

A bank with a simple interest savings plan will automatically transfer money from your paycheck to your savings account, letting you save without any extra effort.

Simple interest allows your money to earn money, so you have to save less.

<h3>What Is Simple Interest?</h3>

Simple interest is a quick and easy method of calculating the interest charge on a loan.

Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.

<h3>Where is simple interest used in real life?</h3>

Application of Simple Interest:

In our daily lives, sometimes, we come across a situation where we need to borrow money from a bank, post office or a moneylender for a specified period.

At the end of this period, we must pay back the money we had borrowed plus some additional money for using the lender's money.

Learn more about simple interest here:

<h3>brainly.com/question/1325643</h3><h3 /><h3>#SPJ4</h3>

3 0
1 year ago
Last thing before i gtg I FINALLY GOT A MAN IN 3 DAYS
frutty [35]
Congrats for getting a man !
4 0
2 years ago
Why did Milan say that he does not like to interview potential employees?
Aneli [31]
It’s the second one,about not being able to see someone’s work-ethic
8 0
3 years ago
Other questions:
  • For each hour of production, a certain factory requires 1 assembly line worker for every 25 units to be produced in that hour. T
    10·1 answer
  • Pharoah Corporation provides its officers with bonuses based on net income. For 2017, the bonuses total $384,900 and are paid on
    6·1 answer
  • Label the following hypothetical demand scenarios. Use the midpoint method.
    5·1 answer
  • A major goal of integrated marketing communications is to send a consistent message to _____.
    6·1 answer
  • 9.15. A market contains a group of identical price-taking firms. Each firm has a marginal cost curve SMC(Q) 2Q, where Q is the a
    15·1 answer
  • Assume that Horicon Corp acquired 25% of the common stock of Sheboygan Corp. on January 1 for $300,000. During the year Sheboyga
    9·1 answer
  • In order to create a budget, you should _____.
    12·2 answers
  • Without authorization, Brady uses the trademark of Ciera Coffee Company to promote cheap, flavorless candy, which is not similar
    10·1 answer
  • Donna and Matthew share an office. Donna was balancing her checkbook when she was called
    6·2 answers
  • For each decision, state whether the company is following a cost leadership or a product differentiation strategy.
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!