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Rudiy27
3 years ago
14

The impact of interest rate changes in the PV of $100 due in 20 years compared to the PV of $100 due in one year are:

Business
1 answer:
kherson [118]3 years ago
8 0

Answer: c. greater because interest rate changes have a greater impact on distant cash flows than near-term cash flows.

Explanation:

Interest rate changes have a greater impact on distant cashflows because those cashflows will be exposed to the interest rates for longer. This means that they will be subjected to more discounting than a cashflow that is due in one year which would be subject to only a single year of discounting.

For instance, assume the required rate of return for two investments is 10%. One investment yields $10,000 in 20 years and another yields $10,000 in 2 years .

The present value of both are:

= 10,000 / (1 + 10%)²⁰                                                  = 10,000 / ( 1 + 10%)²

= $1,486.43                                                                  = $8,264.46

<em>Notice the difference. The longer term investment was more exposed to interest rate effects. </em>

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Harrison Co. issued 13-year bonds one year ago at a coupon rate of 8 percent. The bonds make semiannual payments. If the YTM on
alex41 [277]

Answer:

$1,197.94

Explanation:

For determining the current dollar price we have to applied the present value formula which is to be shown in the attachment below:

Given that,  

Future value = $1,000

Rate of interest = 5.7%  ÷ 2 = 2.85%

NPER = (13 years  - 1 years) × 2 = 24 years

PMT = $1,000 × 8% ÷2  = $40

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

After applying the above formula, the current dollar price of the bond is $1,197.94

6 0
3 years ago
Barker Company paid cash to purchase two identical inventory items. The first purchase cost $18.00 cash and the second cost $20.
Virty [35]

Answer:

The correct answer is D

Explanation:

Cash flow method is the method where the costs or the expenses are moved or shifted from the starting to the end of the firm. The flow of expenses does not apply to the inventory but also involve the other factors in the extra processes to which the cost is attached.

So, the baker purchased the inventory items at different prices and then the sold the one inventory item at profit, so the amount of the cash flow from the operating activities will not affected through the method of cash flow.

8 0
3 years ago
In order to compare the real estate markets in pittsburgh and philadelphia, what are the things that you should consider?
lions [1.4K]

Answer:

When comparing the real estate market of any region or state, there are factors for consideration:

a) Population size

b) Employment status

c) Real estate market

d) Renting strength

e) Price

f) Quality in terms of home structure and a serene environment.

Explanation:

In the question, there are two American cities up for comparison: The city of Pittsburgh and the Philadelphia city, both in the Pennsylvania region. Both cities have comfortable environments which are habitable but here, we have to choose or rather compare both. The first factor is the population size. The two cities which are in the same region, have a considerable population size but when compared, Philadelphia has the upper hand. In real estate business, population is key as a region which a better and fuller population is appreciated more. The second factor is the employment status of the inhabitants. The employment status of these two cities are commendable but Pittsburgh is quite flabbergasting. The employment rate of Pittsburgh to Philadelphia is up to 57%. Employment status is a key determinant when real estate market is mentioned because employed persons are the ones who can actually pay when due. The third factor is the real estate market. This is another factor which is very important in determining the cities' real estate market. Over the years, Philadelphia has shown positive signs of a healthy real estate market which nicks that of Pittsburgh. Other factors listed above have clearly been favourable to Philadelphia because of their location but in terms of price, Pittsburgh appears cheaper with an average price of $1258 compared to Philadelphia's $1,652.

8 0
3 years ago
Lucas Laboratories' last dividend was $1.50. Its current equilibrium stock price is $15.75, and its expected growth rate is a co
Elis [28]

Answer:

Expected dividend yield = 10.0%

Expected capital gains yield =  5.0%

Explanation:

D0 = $1.50 (Given)

E(D1) = D0 * (1 + g) = $1.50 * (1.05) = $1.575

E(P0) = $15.75 (Given)

E(P1) = $15.75 * (1.05)1 = $16.5375

Expected dividend yield = E(D1) / E(P0)

= $1.575 / $15.75 = 0.100 = 10.0%

Expected capital gains yield = (E(P1) - E(P0)) / E(P0)

($16.5375 - $15.75) / $15.75 = 0.050 = 5.0%

4 0
3 years ago
The payment for environmental services (psa) program in costa rica collects payments from the beneficiaries of ecosystem service
MakcuM [25]
<span>According to the means by which environmental services allocate funds to various institutions to fund climate protecting projects, it is clear that the system pays landowners to maintain sustainable practices in their areas and regions, in order to further dwindle the impact of climate change in the modern world.</span>
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3 years ago
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