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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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Jenae's study ignored the fact that only some of her coffee choices had caffeine, even though her co-workers preferred caffeinat
ch4aika [34]

Answer:

Placebo effect

Explanation:

Placebo effect occurs when an individual starts to show positive response to an inactive substance after being told the substance has powers to cure.

The person's mind subconsciously helps him heal or perform better on the false belief that the substance is effective.

In the given scenario Jeanne labelled decaffeinated coffee as caffeinated coffee. On consumption her co-workers claimed that the extra boost of caffeine helped them focus on their work.

This is a placebo effect.

8 0
3 years ago
The use of government taxes and spending to alter macroeconomic outcomes is known as?
maw [93]

it's known as fiscal policy

6 0
2 years ago
During the current year, Elk Company incurred the following direct labor costs: January $40,000 and February $60,000. Elk uses a
Rom4ik [11]

Answer:

January Overheads are <u>under-applied</u> by $2,000.

Explanation:

When,

Actual overheads > Applied overheads we say overheads are under-applied.

Actual overheads < Applied overheads we say overheads are over-applied.

Where,

Applied overheads = Predetermined overhead rate × Actual Activity

Therefore,

Applied overheads (January) = 120% × $40,000

                                                = $48,000

Actual overheads (January) = $50,000.

Conclusion

It can be seen that from the above : Actual overheads : $50,000 > Applied overhead : $48,000, therefore overheads were under-applied.

Amount of under-applied overheads = $50,000 - $48,000

                                                             = $2,000

5 0
3 years ago
Car dealer ben carte paid 97 percent of the base price of 22,567. he also paid 93 percent of options totaling 3,465. and a desti
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3 0
3 years ago
The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be $50,000, and rental costs for t
elena55 [62]

Answer and Explanation:

Revenue                              $160,000

Rental Costs                      $30,000

Variable Costs                      $50,000

Depreciation                      $10,000

Profit before tax              $70,000

Tax(35%)                              $24,500

Net Income                      $45,500

Operating cash flow

a) Dollars in minus dollars out

Revenue ? rental costs ? variable costs ? taxes = $160000 -$30000-$50000-$24,500 = $55,500

b) Adjusted accounting profits

Operating cash flow = Net income + depreciation = $45,500 + $10,000 = $55,500

c) Add back depreciation tax shield

Operating cash flow = [(Revenue ? rental costs ? variable costs) × (1 ? 0.35)] + (depreciation × 0.35)]

= ($160,000-$30000-$50,000)*0.65 + $10,000*0.35 = $55,500

Yes, the above approaches result in the same value for cash flow

4 0
3 years ago
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