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3 years ago

Consider a 10-year bond with a face value of $1,000 that has a coupon rate of 5.5%, with semiannual payments.

Business

1 answer:

DiKsa [7]3 years ago

5 0

Explanation:

It all depends on the market conventions and the bond documentation.

1 In most countries, traditionally fixed coupon bonds don’t have their coupons day counted. So if the frequency is twice a year, and the annual coupon rate is 5.5%, then each semi-annual coupon is exactly 5.5/2=2.75%. However a lot of other instruments, e.g. fixed swap legs, loans, and bonds that are really “loan participation notes”, etc. usually have their fixed coupons day counted. So each coupon amount will vary a little depending on the number of days in the accrual period, weekends and holidays.

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You plan to save $2,400 a year and earn an average rate of interest of 5.6 percent. How much more will your savings be worth at

mixas84 [53]

Answer:

If the deposits are made at the beginning of the year, the future value will increase by $18,821.1.-

Explanation:

Giving the following information:

Annual deposit= $2,400

Interest rate= 5.6%

Number of periods= 40

First, we will calculate the future value when the deposits are made at the end:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {2,400*[(1.056^40) - 1]} / 0.056

FV= $336,091.14

Now, if the deposits are made at the beginning:

FV= {A*[(1+i)^n-1]}/i + {[A*(1+i)^n]-A}

FV= 336,091.14 + [(2,400*1.056^40) - 2,400]

FV= 336,091.14 + 18,821.10

FV= $354,912.24

Difference= 354,912.24 - 336,091.14

Difference= $18,821.1

If the deposits are made at the beginning of the year, the future value will increase by $18,821.1.-

8 0

3 years ago

A _________ approach is found frequently among companies with strong engineering orientations, pharmaceutical and biomedical fir

Korvikt [17]

Answer: Option B

Explanation: In simple words, top down approach refers to the approach ion which the organisation break down its system to have better and clear understanding of the sub systems within.

This approach is used by organisations doing complex business activities or involving high technical skills. Hence this approach is used by firms like biomedical ,financial services and high technology companies etc.

8 0

3 years ago

Anyone know the answer to this?

Ipatiy [6.2K]

Answer:

rework hope this helps :)

Explanation:

5 0

3 years ago

3. An investor shorts 100 shares when the share price is $20 and closes out the position six months later when the share price i

solniwko [45]

Answer:

$160

Explanation:

Calculation to determine How much does the investor gain or lose

Investor gain =[($20-$18.2)*100 Shares]- ($0.2*100 shares)

Investor gain=($1.8*100 shares)-($0.2*100 shares)

Investor gain=$180-$20

Investor gain=$160

Therefore The amount that the investor gain is $160

7 0

3 years ago

Sonny's BBQ Company recently issued $85 par value preferred stock that pays an annual dividend of $9. Analysts estimate that the

Bond [772]

Answer:

Intrinsic value=$73.77

Explanation:

The Dividend Valuation Model(DVM) is a technique used to value the worth of an asset.

According to this model, the value of an asset is the sum of the present values of the future cash flows would that arise from the asset discounted at the required rate of return.

Price = D/Kp

D- Dividend payable

Kp- cost of preferred stock

So will need to work out the cost of equity using CAPM

The capital asset pricing model (CAPM): relates the price of a share to the market risk or systematic risk. The systematic risk is that which affects all the all the economic agents, e.g inflation, interest rate e.t.c

This model is considered superior to DVM. Hence, we will use the CAPM

Using the CAPM , the expected return on a asset is given as follows:

E(r)= Rf +β(Rm-Rf)

E(r) =? , Rf- 2.4%, Rm- 12.1% β- 1.01

E(r) = 2.4% + 1.23×(12.1- 2.4)% = 12.20 %

Cost of preferred stock= 12.20 %

Using the dividend valuation model

Intrinsic value = 9/0.1220=73.77

Intrinsic value=$73.77

5 0

3 years ago