Answer:
-5.14 for sam
-18.01% for dave
Explanation:
We first calculate for Sam
R = 7.3%
We have 2% increase
= 9.3%
We calculate for present value of coupon and present value at maturity using the formula for present value in the attachment
To get C
1000 x 0.073/2
= 36.5
time= 3 years x 2 times payment = 6
Ytm = rate = 9.3%/2 = 0.0465
Putting values into the formula
36.5[1-(1+0.0465)^-6/0.0465]
= 36.5(1-0.7613/0.0465)
36.5(0.2385/0.0465)
= 36.5 x 5.129
Present value of coupon = 187.20
We solve for maturity
M = 1000
T = 6 months
R = 0.0465
1000/(1+0.0465)⁶
= 1000/1.3135
Present value = 761.32
We add up the value of present value at maturity and that at coupon
761.32 + 187.20
= $948.52
Change in % = 948.52/1000 - 1
= -0.05148
= -5.14 for sam
We calculate for Dave
He has 20 years and payment is two times yearly
= 20x2 = 40
36.5 [1-(1+0.0465)^-40/0.0465]
Present value = 36.5 x 18.014
= 657.511
At maturity,
Present value = 1000/(1+0.0465)⁴⁰
= 1000/6.1598
= 162.34
We add up these present values
= 657.511+162.34 = $819.851
Change = 819.851/1000 -1
= -0.1801
= -18.01%
Answer:
interest expense 3,000 debit
interest payable 3000 credit
Explanation:
We will recognize the accrued interest for the period Nov 1st to Dec 31th
principal x rate x time
120,000 x 11%/12 x 3 months = 3,000
We divide the rate by 12 as there is express as annual rate and we need to match with time, which is months.
The entry will recognize interest expense for 3,000
and interest payable for 3,000
Answer:
Total Claim = $2416
Explanation:
The coverage on the currency = $250
The coverage on the jewelry = $1000
The limit on the gold, pewter, and silver = $2500
The amount that is stolen:
The amount of cash = $270
The worth of jewelry = $1734
Pewterware = $1666
The miximum coverage = 250 + 1000 + 2500 = $3750
Actual loss = 270 + 1734 + 1666 = $3670
Reimbursement amount = 250 + 1000 + 1666 = $2916
Total Claim = Total Amount Covered – Deductible
Total Claim = $2916 - $500 = $2416
Answer:
It will take 3 years to have enough money to purchase the car.
Explanation:
We can use either Compounding or Discounting Formula to determine the time it will take to make $19,970 from $15,000 when the investment rate is 10%. Lets go with the Compounding Formula:
Future Value = Present Value * (1 + i) ^ n
<u>Re-arrange equation for "n" which is the Time Period:</u>
⇒ FV / PV = (1 + i) ^ n
Taking log on both sides;
⇒ log (FV / PV) = log (1 + i) ^ n
OR log (FV / PV) = n log (1 + i)
OR n = log (FV / PV) / log (1 + i)
Simply put values now;
⇒ n = log (19,970 / 15,000) / log (1 + 10%) = log (1.33) / log (1.1) = .12 / .04
OR n = 3
Answer:
c. $166.67 million
Explanation:
cost of expansion = new equity issued / (1 - flotation costs)
cost of expansion = $150 million / (1 - 10%) = $150 million / 90% = $166.67 million
Flotation costs increase the cost of equity, since they are an expense that decreases the net amount of money received by a corporation when it issued new stocks or new bonds.
