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zaharov [31]
2 years ago
15

Jim Busby calls his broker to inquire about purchasing a bond of Disk Storage Systems. The broker quotes a price of $1,180. Jim

is concerned that the bond might be overpriced based on the facts involved. The $1,000 par value bond pays 14 percent interest, and it has 25 years remaining until maturity. The current yield to maturity on similar bonds is 12 percent. Compute the new price of the bond.
Business
1 answer:
Dimas [21]2 years ago
5 0

Answer:

Jim Busby and Bonds of Disk Storage Systems

The new price of the bond is:

= $21,059

Explanation:

a) Data and Calculations:

Quoted price of bond = $1,180

Face value of bond = $1,000

Coupon interest rate = 14%

Bond's maturity period = 25 years

Current yield to maturity = 12%

Therefore, new price of the bond is computed as follows:

Bond Price = C* (1-(1+r)-n/r ) + F/(1+r)n

where C = Periodic coupon payment = $140 ($1,000 * 14%)

• F = Face / Par value of bond = $1,000

• r = Yield to maturity (YTM) = 12% and

• n = No. of periods till maturity = 25 years

= $140 * (1 – (1+0.12)^-25)/0.12 +$1000/(1+0.12)^25

= $140 * (1 - -17.00)/0.12 + $1,000/17.00

= $140 * (18.00)/0.12 + $1,000/17.00

= $140 * 150 + $59

= $21,000 + $59

= $21,059

 

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Answer:

PMT x {[(1 + r)^n – 1]/r}

Explanation:

The formula for calculation the future value of an ordinary annuity is given as :

PMT x {[(1 + r)^n – 1]/r} ;

Where ;

PMT = Payment amount ; r = discount rate

n = number of payments

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3 0
3 years ago
When the demand for the economy is expanding, the demand for loanable funds will ________.
nikklg [1K]

When the demand for the economy exist expanding, the demand for loanable funds will increase.

<h3>What is Demand?</h3>

The quantity of a good that consumers are willing and able to buy at various prices at a specific time period and location is known as the demand. The demand curve is another name for the relationship between price and quantity demand. Demand is just a consumer's desire to buy products and services immediately and to pay the price associated with them. Demand can be defined as the quantity of things that consumers are prepared and willing to purchase at various prices within a specific time frame.

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7 0
1 year ago
PLEASE HELP ASAP!!! (There are 4 Questions)
Ivanshal [37]

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3. The annual exclusion for 2014, 2015, 2016 and 2017 is $14,000. For 2018 and 2019, the annual exclusion is $15,000.

4. line of credit loan will help protect a business in case of emergency. It is an open loan that the business can draw from when it needs more money, and pay it back. Unlike installment loans, once the principal is paid the line stays open for use in the future without the need to reapply each time.

3 0
3 years ago
Read 2 more answers
Maloney's, Inc. has found that its cost of common equity capital is 17 percent and its cost of debt capital is 6 percent. The fi
Gwar [14]

Answer:

11.64%

Explanation:

The formula to compute WACC is shown below:

= Weightage of debt × cost of debt × ( 1- tax rate)  + (Weightage of  common stock) × (cost of common stock)

where,  

Weighted of debt = Debt ÷ total firm

The total firm includes debt, preferred stock, and the equity which equals to

= $3,000,000 + $2,000,000 = $5,000,000

So, Weighted of debt = ($2,000,000 ÷ $5,000,000) = 0.40

And, the weighted of common stock = (Common stock ÷ total firm)

                                                              = $3,000,000 ÷ $5,000,0000

                                                              = 0.60              

Now put these values to the above formula  

So, the value would equal to

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8 0
3 years ago
Presented below is the adjusted trial balance of Splish Brothers, Inc. at December 31, 2017. Debit Credit Cash $ ? Supplies 1,33
igomit [66]

Answer:

Cash $   5710

Total   debit side  $  199200 Credit side  $ 199200

Explanation:

We list the correct accounts at the right side. First we add up the credit side to find the total and then subtract the debit side from it to get the cash amount as the debit and credit side of the trial balance must be equal.

<u><em>Splish Brothers, Inc.</em></u>

<u><em>Adjusted trial balance </em></u>

<u><em>December 31, 2017.</em></u>

                                                              Debit                   Credit

Cash $                                                    5710

Supplies                                               1,330

Accounts Receivable                         3,580

Prepaid Insurance                             2,620

Equipment                                          80,160

Accumulated Depreciation—Equipment                        $20,100

Trademarks                                         3,760

Accounts Payable                                                             3,220

Salaries and Wages Payable                                               920

Unearned Service Revenue                                               1,060

Bonds Payable (due 2024)                                                31,880

Common Stock                                                                    2,120

Additional paid-in capital                                                    15,160

Retained Earnings                                                              14,720

Service Revenue                                                                30,040

Salaries and Wages Expense          14,080

Insurance Expense                           2,400

Rent Expense                                    3,260

<u> Interest Expense                              2,320                                              </u>

<u>Total                                         $  199200                             $ 199200</u>

<u></u>

7 0
3 years ago
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