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grin007 [14]
3 years ago
6

Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years

to maturity, whereas Bond Dave has 18 years to maturity. If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Sam
Business
1 answer:
Natali5045456 [20]3 years ago
4 0

Answer: -12.1%

Explanation:

Bond Sam was priced at Par which means it could have been priced at $1,000 and its yield was the same as the coupon rate of 8%.

If interest rates rise by 5%, the yield becomes:

= 8% + 5%

= 13%

Price of bond is attached:

Yield = 13% /2 = 6.5% per semiannual period

Coupon = 8% * 1,000 * 0.5 = $40 per semi annual period

Period till maturity = 3 * 2 = 6 semiannual periods

Price = $878.97

Percentage change in price:

= (878.97 - 1,000) / 1,000 * 100%

= -12.1%

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The complete question has been added with an image for better understanding of the concept. The beneficiaries of the inflation and interest rates will be,

  1. When inflation is 1 percent, Diane will benefit more than Jack;
  2. When inflation is 0 percent; Diane will benefit more than Jack;
  3. When inflation is 4 percent; Jack will benefit more than Diane;
  4. When inflation is -2 percent; Diane will benefit more than Jack.

<h3>What is inflation?</h3>

A given increase in rates or prices of any commodity, including monies, over a particular financial period is known as inflation.

The rates and beneficiaries due to the unexpected change in inflation for the above situation is given attached in the image in the form of a table.

Hence, the significance of inflation is as mentioned.

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5 0
2 years ago
Mary traded furniture used in her business to a furniture dealer for some new furniture. Mary originally purchased the furniture
likoan [24]

Answer:

$24,000

Explanation:

From the time an asset is acquired until the time it is sold, an asset experiences a number of events which causes an increase or decrease of its total value. Th adjusted basis of a given asset, takes the base price of an asset and adjusts it for changes in value reflecting enhancements and or depreciation. For instance, a given asset purchased for $100, depreciates by $10 and has an improvement of $60 would have an adjusted basis of $100 - $10 + $60 = $150.

Now when Mary bought her furniture, the adjusted basis was $20,000. At the time of exchange, the fair market value of the furniture is $4,000 whereas Mary also gave $4,000 to the dealer in the transaction. This $4,000 changes the value ans is added to the previous adjusted basis of $20,000.

Mary's adjusted basis in the new furniture after the exchange is:

= $4,000 + $20,000

= $24,000

8 0
3 years ago
Of the 16 businesses located at the Tri-City Shopping Center, one-quarter are service businesses. How many
andreyandreev [35.5K]

Answer:there are 4

Explanation:if you take the 16 businesses and multiply it by a quarter which is .25 and you will get 4

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3 years ago
1. What are the three key assets that Walmart can leverage (build on) to compete with Amazon and other online retailers
Colt1911 [192]

Answer:

The 3 important assets that Walmart can be used to remain competitive with Amazon have been listed below.

Explanation:

Driven by the increasing utilization of internet shopping, retail chains, together with Walmart, were concerned about its business model. However, as Walmart is still in a safe stance and has been for some moment, it could be said that this same corporation does have some methodologies to encourage Amazon, its biggest throughout the world corporation.

  • Walmart seems to have the biggest independent water channel transportation system.
  • It would have the fastest-growing traditional retail stores across the U.S. Just because of this, this has become a density.
  • Also, this same strategy will enhance the percentage of warehouses and therefore a retail distribution channel.
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All of the following are potential benefits of innovation EXCEPT: Group of answer choices improved quality (attributes) of exist
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The potential benefit of innovation is the improved quality (attributes) of existing products. The correct option is A.

<h3>What is innovation?</h3>

Innovation is introducing new things and ideas.

The advantages of innovation are:

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5 0
2 years ago
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