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Aleks04 [339]
3 years ago
9

(A bond forward) A certain 10-year bond is currently selling for $920 A friend of yours owns a forward contract on this bond tha

t has a delivery date in 1 year and a delivery price of s 940. The bond pays coupons of $ 80 every 6 months, with one due 6 months from now and another just before maturity of the forward. The current interest rates for 6 months and 1 year (compounded semiannually) are 7% and 8%. respectively (annual rates compounded every 6 months). What is the current value of the forward contract? First solve for the current forward price Ft of the bond:
Hint Ft d,M) に1 d(k,M) S=920 d(0, M)- d(2, M) c(k)- 80
Business
1 answer:
sleet_krkn [62]3 years ago
4 0

Answer: -$100

Explanation:

Value of forward contract = Selling price - Forward price on bond

Forward price = Present value of cashflows + Present value of bond

Periodic rate = 7%/ 2 = 3.5% per semi annum

= 8% / 2 = 4%

3.5% will be used to discount the payment 6 months from now as that is the 6 month rate. The rest will be 4%.

= (80 / (1 + 3.5%) ) + ( 80 / ( 1 + 4%)²) + (940 / ( 1 +4%)²)

= $1,020.342

= $1,020

Value of forward contract = 920 - 1,020

= -$100

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West County Bank agrees to lend Drake Builders Company $400,000 on January 1. Drake Builders Company signs a $400,000, 6%, 6-mon
viva [34]

Answer:

The answer is b.Cash ,000 Notes Payable ,000

Explanation:

The exact entry Drake Builders Company has to record in its accounting book for the proceeds received from the issuance of the note is:

1st January

Dr Cash                         400,000

Cr Note Payable          400,000

As at the time the note is issued, no interest expenses has been incurred, all the answer with Interest expenses can be eliminated.

In fact, interest expenses is only incurred and accrued during the lifetime of the note, based on the number of days the note is hold; that is, from the day the fund is lend out to Drake Builders Company; not on the day of issuance.

6 0
3 years ago
On April 16, 2018, Rodriguez Corporation reacquired 12,000 shares of its own $10 par stock for $660,000 cash. On November 4, 201
never [62]

Answer:

The answer is a) Credit to additional Paid In Capital: Treasury Stock Transactions of $10,000.

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The repurchased price per share in April 16,2018 is equal to: 660,000/12,000 = $55 per share;

Thus, once the reissued of these 12,000 repurchased shared took place, common stock account will be credited at the amount equal to 55 x Number of share reissued. In case the reissued price is higher than $55, the surplus amount will be Credited into Paid-in Common share account to present the difference between cash receipt and common share recorded; in case reissued price is lower than $55, Retained earning account will be debited to present the difference between cash receipt and common share recorded

As a result, the reissued of share on November 4,2019 will include a $10,00 credited to additional Paid In Capital; calculated as (65-55) x 1,000 = $10,000.

6 0
3 years ago
You are creating a portfolio of two stocks. The first one has a standard deviation of 20% and the second one has a standard devi
Drupady [299]

Answer:

23.56

Explanation:

Standard deviation of  the first stock (σ1) = 20%

Standard deviation of  the second stock (σ2) = 37%

The correlation coefficient between the returns (ρ) = 0.1.

Proportion invested in the first stock (W1) = 43%

Proportion invested in the second stock (W2) = 57%

The standard deviation of a two-stock portfolio's returns is given by

\sigma_{portfolio} = \sqrt{w_1^2\sigma_1^2+w_2^2\sigma_2^2+2w_1w_2\rho\sigma_1\sigma_2} \\\sigma_{portfolio} = \sqrt{0.43^2*0.2^2+0.57^2*0.37^2+2*0.43*0.57*0.1*0.2*0.37}\\\sigma_{portfolio} =0.2356=23.56\%

The standard deviation of this portfolio's returns IS 23.56%

8 0
3 years ago
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Answer:

true

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3 0
3 years ago
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Yes

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If a kid sells things daily to people to make profit then that kid would have a "business"

6 0
3 years ago
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