PLEASE HELP ASAP::::

Bond J has a coupon of 7.6 percent. Bond K has a coupon of 11.6 percent. Both bonds have 12 years to maturity and have a YTM of

elena55 [62]

Answer:

Bond J has a coupon of 7.6%

Bond K has a coupon of 11.6%

12 years to maturity and YTM of 8.2%

first we must determine the current market price of both bonds using the yield to maturity formula:

YTM = {C + [(FV - PV) / n]} / [(FV + PV) / 2]

YTM = 8.2%
C = coupon payment = $76 and $116
FV = face value or value at maturity = $1,000
PV = present value or current market value = ???
n = 12 years

current market value of Bond J:

0.082 = {76 + [(1,000 - PV) / 12]} / [(1,000 + PV) / 2]

[(1,000 + PV) / 2] x 0.082 = 76 + [(1,000 - PV) / 12]

41 + 0.041PV = 76 + 83.33 - 0.083PV

0.124PV = 118.33

PV = 118.33 / 0.124 = $954.27

current market value of Bond K:

41 + 0.041PV = 116 + 83.33 - 0.083PV

0.124PV = 158.33

PV = 158.33 / 0.124 = $1,276.85

a. If interest rates suddenly rise by 2.2 percent, what is the percentage price change of these bonds?

YTM = {C + [(FV - PV) / n]} / [(FV + PV) / 2]

YTM = 8.2% + 2.2% = 10.4%
C = coupon payment = $76 and $116
FV = face value or value at maturity = $1,000
PV = present value or current market value = ???
n = 12 years

market value of Bond J:

0.102 = {76 + [(1,000 - PV) / 12]} / [(1,000 + PV) / 2]

[(1,000 + PV) / 2] x 0.102 = 76 + [(1,000 - PV) / 12]

102 + 0.051PV = 76 + 83.33 - 0.083PV

0.134PV = 157.33

PV = 57.33 / 0.134 = $427.84

market value of Bond K:

102 + 0.051PV = 116 + 83.33 - 0.083PV

0.134PV = 97.33

PV = 97.33 / 0.134 = $726.34

Bond J's market price will decrease by ($427.84 - $954.27) / $954.27 = -55.17%

Bond K's market price will decrease by ($726.34 - $1,276.85) / $1,276.85 = -43.11%

b. If interest rates suddenly fall by 2.2 percent, what is the percentage price change of these bonds?

YTM = {C + [(FV - PV) / n]} / [(FV + PV) / 2]

YTM = 6%
C = coupon payment = $76 and $116
FV = face value or value at maturity = $1,000
PV = present value or current market value = ???
n = 12 years

current market value of Bond J:

0.06 = {76 + [(1,000 - PV) / 12]} / [(1,000 + PV) / 2]

[(1,000 + PV) / 2] x 0.06 = 76 + [(1,000 - PV) / 12]

30 + 0.030PV = 76 + 83.33 - 0.083PV

0.113PV = 129.33

PV = 129.33 / 0.113 = $1,144.51

current market value of Bond K:

30 + 0.030PV = 116 + 83.33 - 0.083PV

0.113PV = 169.33

PV = 169.33 / 0.113 = $1,498.50

Bond J's market price will increase by ($1,144.51 - $954.27) / $954.27 = 19.94%

Bond K's market price will increase by ($1,498.50 - $1,276.85) / $1,276.85 = 17.36%

8 0

2 years ago

"Reginald owns a grocery and his clerks are on strike. Reginald is trying to operate the store with the help of his manager, but

nirvana33 [79]

Answer:

The right thing for Reginald to do Is to merge law and equity to resolve the situation.

Explanation:

It means Reginald should call the ten striking clerks to the table and hear out their grievances and do something about their grievances if the fault is from him(Reginald) so that they can get back to work, but if they fail to come to a compromise, the law can be apply.

3 0

3 years ago

The principle that allows you to perceive an orange shirt to be the same color under varying lighting conditions is known as:

katrin2010 [14]

<span>This is color constancy. With this ability, a person can perceive and understand that a color exists under various external conditions, usually lighting or other types of distortion. It is thought to be due to specialized neurons in the primary visual cortex that allow us to make these declarations.</span>

3 0

3 years ago

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $215. Data for last year’

Stella [2.4K]

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Selling price= $215

Units in beginning inventory 0

Units produced 9,800

Units sold 9,300

Units in ending inventory 500

Variable costs per unit:

Direct materials $ 61

Direct labor 33

Variable manufacturing overhead 10

Variable selling and administrative 15

Total variable cost per unit $ 119

Fixed costs:

Fixed manufacturing overhead $ 274,400

Fixed selling and administrative 510,000

Total fixed costs $ 784,400

Absorption costing includes fixed manufacturing overhead in the cost per unit.

A) Unitary fixed manufacturing overhead= 274,400/9800 units= $28

Unitary cost= Direct materials + Direct labor + Variable manufacturing overhead + fixed manufacturing overhead

Unitary cost= 61 + 33 + 10 + 28= $132

B) Income statement:

Sales= 9300*215= $1,999,500

COGS= 132*9300=$1,227,600

Gross profit= $771,900

Total selling and administrative expense= 510,000 + 15*9300= 649,500

Net operating income= $122,400

4 0

3 years ago

you are considering investing in general motors (GM). which of the following is an example of diversifable risk? a. risk resulti

Maru [420]

Answer:

d. risk resulting from an expected automobile industry shock g

Explanation:

Non systemic risk are risks that can be diversified away. they are also called company specific risk or industry specific risk . Examples of this type of risk is a manager engaging in fraudulent activities and risk resulting from an expected automobile industry shock

Systemic risk are risk that are inherent in the economy. They cannot be diversified away. They are also known as market risk. examples of this risk include recession, inflation, and high interest rates. Investors should seek compensation for systemic risk. Systemic risk is measured by beta. The higher beta is, the higher the systemic risk and the higher the compensation demanded for by investors

7 0

2 years ago