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inna [77]
3 years ago
14

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annua

l coupon payments. Suppose a German company has a bond outstanding with a par value of €1,000, 10 years to maturity, and a coupon rate of 7.6 percent paid annually. If the yield to maturity is 8.7 percent, what is the current price of the bond? g
Business
1 answer:
Alecsey [184]3 years ago
4 0

Answer:

€928.46

Explanation:

Since it was hinted that bonds issued outside of  the United States pay coupons annually, it is expected that the bonds issued in Germany pay annual coupons, and its price is computed below using the bond price formula, excel PV function, and financial calculator:

Bond price=face value/(1+r)^n+annual coupon*(1-(1+r)^-n/r

face value=€1,000

r=yield to maturity=8.7%

n=number of annual coupons in 10 years=10

annual coupon=face value*coupon rate=€1,000*7.6%=€76

bond price=1000/(1+8.7%)^10+76*(1-(1+8.7%)^-10/8.7%

bond price=1000/(1.087)^10+76*(1-(1.087)^-10/0.087

bond price=1000/2.30300797+76*(1-0.43421474)/0.087

bond price=1000/2.30300797+76*0.56578526/0.087

bond price= 434.21+494.25= €928.46

Excel PV function:

=-pv(rate,nper,pmt,fv)

=-pv(8.7%,10,76,1000)

pv=€928.46

Financial calculator:

N=10

PMT=76

I/Y=8.7

FV=1000

CPT PV=€928.46

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Great Kids Co. began providing day care for the children of employees of a large corporation on January 15 for an agreed monthly
nirvana33 [79]

Answer:

A. A credit to Child Care Fees Earned of $4,500.

Explanation:

The journal entry to record this given transaction is shown below:

Cash A/c Dr $4,500

       To Child Care Fees Earned A/c $4,500

(Being the fees earned is recorded)

Since the payment is received that means cash balance is increased so we debited the cash account and credited the child care fees earned account.

The monthly fee is $9,000 but we have to compute for 15 days, so it would be

= $9,000 ÷ 2

= $4,500

7 0
3 years ago
During the second quarter of the year, Wallace Enterprises received $30,000 from customers in exchange for providing electronic
SSSSS [86.1K]

Answer:

On an income statement, the company would declare c. $21,000 expenses

Explanation:

Wallace Enterprises received $30,000 from customers in exchange for providing electronic components. Income from the exchange was $30,000

During the second quarter of the year, total expense = supplies expense + interest expenses + wages expense = $5,000 + $1,000 + $15,000 = $21,000

Income from the exchange - total expense = $30,000 - $21,000 = $9,000>0

The company recognizes gain $9,000.

On an income statement, the company would declare $21,000 expenses

5 0
3 years ago
Riverbed Corp bought equipment on January 1, 2022. The equipment cost $460000 and had an expected salvage value of $65000. The l
balandron [24]

Answer:

Book value= $302,000

Explanation:

Giving the following information:

Purchase price= $460,000

Salvage value= $65,000

Useful life= 5 years

<u>First, we need to calculate the annual depreciation.</u>

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (460,000 - 65,000) / 5

Annual depreciation= $79,000

<u>Now, the accumulated depreciation after 2 full years:</u>

Accumulated depreciation= 79,000*2= $158,000

<u>Finally, the book value:</u>

Book value= purchase price - accumulated depreciation

Book value= 460,000 - 158,000

Book value= $302,000

7 0
2 years ago
sing the preceding information, answer the following questions: (Note: Round your answers to the nearest millionth dollar.) • Wh
DedPeter [7]

Answer:

$20 million is expected to have cash balance at the end of the year.

$39 million is the maximum possible investment funds that company is expected to invest.

Yes it is true net cash flow is likely to decrease in the next quarter if the company allows customer to pay in 90 days instead of 60 days.

4 0
3 years ago
The owner of an orange grove must decide when to pick one variety of oranges. She can sell them for $27 a bushel if she sells th
uysha [10]

Answer:

The oranges should be picked in 2 weeks for maximum return

Explanation:

We assume that the return of the owner is y ($)

Assume that the number of weeks the oranges should be picked to have maximum return is x (weeks). (x≥0)

If collect now, the price for each bushel is $27

As the price per bushel decrease by $1.50 per bushel each week

=> After x weeks, the price of a bushel decrease: 1.5x ($)

=> The price of 1 bushel after x weeks is: 27 - 1.5x ($)

If collect now, each tree can yield 7 bushels

As the yield increases by half a bushel per week for the next 5 weeks

=> After x weeks with x ≤ 5, each trees would yields: 7 + 0.5x (bushels)

The return = The price of each bushes × The quantity of bushels

=> y = (27-1.5x)(7+0.5x)

⇔y= 27 (7 +0.5x) - 1.5x(7+0.5x) = 189 + 13.5x - 10.5x - 0.75x^{2}

⇔y = -0.75x^{2} +3x +189

We have: if the equation has the form of y =ax^{2} +bx +c with a≠0, its maximum value is: max y = c - \frac{b^{2} }{4a}

In the equation y = -0.75x^{2} +3x +189, we have: a = -0.75; b = 3; c = 189

=> max y = c -\frac{b^{2} }{4a} = 189 - \frac{3^{2} }{4.(-0.75)} = 189 - \frac{9}{-3}  = 189 - (-3) = 189+3 = 192

To look for the number of weeks, we should find x (0≤x≤5) with which y = 192

192 = -0.75x^{2} +3x +189

⇔-0.75x^{2} + 3x + 189 - 192 = 0

⇔-0.75 x^{2} + 3x - 3 =0

⇔-0.75x^{2}  + 4*0.75x - 0.75*4 =0

⇔x^{2} -4x + 4 = 0

⇔ (x-2)^{2}  = 0

⇔ x = 2

The oranges should be picked in 2 weeks for maximum return

7 0
2 years ago
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