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erastova [34]
3 years ago
10

10 years with a stated interest rate of 11% and a face value of $500,000. Interest payments are made semi-annually. The market r

ate for this type of bond is 12%. Using present value tables, calculate the issue price of the bonds
Business
1 answer:
IrinaVladis [17]3 years ago
7 0

Answer:= $471,325

Explanation:

Price of a bond = Present value of coupon payments + Present value of face value at maturity

Coupon payments = 500,000 * 11% * 1/2 years = $27,500  

Periodic yield = 12%/ 2 = 6% per semi annual period  

Periods = 10 * 2 = 20 semi annual periods

Coupon payment is constant so it is an annuity.  

Price of bond = Present value of annuity + Present value of face value at maturity  

= (Annuity * Present value interest factor of Annuity, 6%, 20 years) + Face value / (1 + rate) ^ number of periods  

= (27,500 * 11.4699) + 500,000 / (1 + 6%)²⁰  

= $471,325

You might be interested in
ABC common stock just paid a dividend of $2.50 per share. The ABC dividend is expected to grow 20% per year for two years, and t
Liula [17]

Answer and Explanation:

Given that the dividend will grow at 20% for two years and then a constant 6% at third year

1st year dividend at 20%= $3

Present value of the dividend for the first year=PV factor at 15%(from table) = $2.61

2nd year dividend at 20% = $3.60

Present value of the dividend for the second year = PV factor at 15%(from table) $2.72

3rd year dividend at 6% growth rate =

$42.40

Present value of the dividend for the third year = PV factor at 15% = $32.06

Current price of the stock =$2.61+$2.72+$32.06

=$37.39

6 0
3 years ago
In​ Keynes's analysis of the speculative demand for​ money, what will happen to money demand if people suddenly decide that the
Serggg [28]

Answer:

The correct answer is option C.

Explanation:

When the interest rate falls below the normal level, people expect the interest rates to rise in future and bond prices to fall. This causes investors to sell the bonds at present so that they can buy bonds when they are selling at lower prices in future as of result of an increase in interest rates. Money demand will, as a result, will decrease.

4 0
3 years ago
suppose the real rate is 3.4 percent and the inflation rate is 5 percent. what rate would you expect to see on a treasury bill?
Ghella [55]

the rate expected on the treasury bill is 8.57%. enter answer as a percent rounded to 2 decimal places.

The real rate is 2.1 percent

The inflation rate is 3.4 percent

To find the rate which is to be expected on a treasury bill we have to apply fisher's equation

1+R= (1+r)(1+h)

Therefore, the rate on the treasury bill can be calculated as follows

1+R= (1+r)(1+h)

r= 3.4%

= 3.4/100

= 0.034

h= 5%

= 5/100

= 0.05

R= (1+r)(1+h)-1

= (1+0.034)(1+0.05)-1

= (1.034×1.05)-1

= 1.0857-1

= 0.0857×100

= 8.57%

A Treasury invoice (T-invoice) is a brief-term debt obligation backed via the U.S. Treasury Department with an adulthood of one year or less. Treasury bills are generally bought in denominations of $1,000 even as a few can attain a denomination of $five million.

let's say an investor purchases a par price of $1,000 T-bill with an aggressive bid of $950. whilst the T-invoice matures, the investor is paid $1,000, thereby income $50 in interest on the funding.

U.S. Treasury bills are auctioned on a regular schedule. individuals should purchase T-payments from the government using the TreasuryDirect internet site. it is free to register, and it'll function like a brokerage account that holds your bonds. in addition to bidding on new troubles, You also can install reinvestments into securities of an equal type and time period. as instance, you can use the proceeds from a maturing fifty-two-week invoice to shopping for some other fifty-two-week invoice. sure brokerage corporations can also permit buying and selling in U.S. Treasuries.

To learn more about treasury bills visit here:

brainly.com/question/17204626

#SPJ4

7 0
1 year ago
Which of the following will require you to pay back any money you recieve
AlexFokin [52]
That's not a question, but the proper answer should be a loan.
6 0
3 years ago
Marvin Gaye's song "Gotta Give It Up" was protected by ___________ .
monitta

Answer:

d. not selected option d copyright

6 0
3 years ago
Read 2 more answers
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