FINANCIAL LITERACY <br> WILL MARK BRAINLIEST PLS HELP ASAP!!

Bond J has a coupon of 7.6 percent. Bond K has a coupon of 11.6 percent. Both bonds have 12 years to maturity and have a YTM of

elena55 [62]

Answer:

Bond J has a coupon of 7.6%

Bond K has a coupon of 11.6%

12 years to maturity and YTM of 8.2%

first we must determine the current market price of both bonds using the yield to maturity formula:

YTM = {C + [(FV - PV) / n]} / [(FV + PV) / 2]

YTM = 8.2%
C = coupon payment = $76 and $116
FV = face value or value at maturity = $1,000
PV = present value or current market value = ???
n = 12 years

current market value of Bond J:

0.082 = {76 + [(1,000 - PV) / 12]} / [(1,000 + PV) / 2]

[(1,000 + PV) / 2] x 0.082 = 76 + [(1,000 - PV) / 12]

41 + 0.041PV = 76 + 83.33 - 0.083PV

0.124PV = 118.33

PV = 118.33 / 0.124 = $954.27

current market value of Bond K:

41 + 0.041PV = 116 + 83.33 - 0.083PV

0.124PV = 158.33

PV = 158.33 / 0.124 = $1,276.85

a. If interest rates suddenly rise by 2.2 percent, what is the percentage price change of these bonds?

YTM = {C + [(FV - PV) / n]} / [(FV + PV) / 2]

YTM = 8.2% + 2.2% = 10.4%
C = coupon payment = $76 and $116
FV = face value or value at maturity = $1,000
PV = present value or current market value = ???
n = 12 years

market value of Bond J:

0.102 = {76 + [(1,000 - PV) / 12]} / [(1,000 + PV) / 2]

[(1,000 + PV) / 2] x 0.102 = 76 + [(1,000 - PV) / 12]

102 + 0.051PV = 76 + 83.33 - 0.083PV

0.134PV = 157.33

PV = 57.33 / 0.134 = $427.84

market value of Bond K:

102 + 0.051PV = 116 + 83.33 - 0.083PV

0.134PV = 97.33

PV = 97.33 / 0.134 = $726.34

Bond J's market price will decrease by ($427.84 - $954.27) / $954.27 = -55.17%

Bond K's market price will decrease by ($726.34 - $1,276.85) / $1,276.85 = -43.11%

b. If interest rates suddenly fall by 2.2 percent, what is the percentage price change of these bonds?

YTM = {C + [(FV - PV) / n]} / [(FV + PV) / 2]

YTM = 6%
C = coupon payment = $76 and $116
FV = face value or value at maturity = $1,000
PV = present value or current market value = ???
n = 12 years

current market value of Bond J:

0.06 = {76 + [(1,000 - PV) / 12]} / [(1,000 + PV) / 2]

[(1,000 + PV) / 2] x 0.06 = 76 + [(1,000 - PV) / 12]

30 + 0.030PV = 76 + 83.33 - 0.083PV

0.113PV = 129.33

PV = 129.33 / 0.113 = $1,144.51

current market value of Bond K:

30 + 0.030PV = 116 + 83.33 - 0.083PV

0.113PV = 169.33

PV = 169.33 / 0.113 = $1,498.50

Bond J's market price will increase by ($1,144.51 - $954.27) / $954.27 = 19.94%

Bond K's market price will increase by ($1,498.50 - $1,276.85) / $1,276.85 = 17.36%

8 0

3 years ago

Identify the correct pricing strategy. Incorporating _______ pricing strategy drives customers to pay a higher price for a valua

harkovskaia [24]

Answer:

Premium, value

Explanation:

Premium Pricing Strategy: this a strategy used by companies to drive up the prices for their products. This strategy is used when customers can be convinced that a company will offer a higher value than its competitors.

For example, looking at the prices of a Rolls Royce Phantom and a Toyota, one costs $450,000 and the other costs $25,000, both will take you from your office to your house, but some customers will prefer to buy the Rolls Royce, this is because of the value the Rolls Royce offers.

Value: this is the worth or usefulness of something. Therefore, if a company can offer value for money, customers will be willing to pay.

8 0

3 years ago

In a planned economy, prices of commodities are controlled by _________.

GalinKa [24]

The correct answer is C. The government

Explanation:

The key feature of a planned economy is the strong influence and control of government in the economy. Indeed, in a planned economy it is the government the entity that decides on trade and production, this includes the prices of goods and the types of products that should be manufactured. Moreover, this does not occur in market economies because in these customers, produces and the law of supply/demand determine factors of the economy. According to this, in a planned economy prices are controlled by government.

4 0

3 years ago

Clampett, Inc. converted to an S corporation on January 1, 2018. At that time, Clampett, Inc. had cash ($40,000), inventory (FMV

Lubov Fominskaja [6]

Answer

The answer and procedures of the exercise are attached in image below.

Explanation

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.

7 0

3 years ago

In a new margin account, a customer sells short $60,000 worth of ABC stock and deposits $30,000 to meet the Regulation T require

Sidana [21]

The SMA balance in the account would be 7500.

<h3>What is Special Memorandum Account (SMA)?</h3>

The excess margin from a client's margin account is put into a special memorandum account (SMA), which is a dedicated investment account, improving the client's purchasing power. The SMA, which is often referred to as a "special miscellaneous account," functions effectively as a line of credit.

It's important to distinguish between separately managed accounts, often known as SMAs, and special memorandum accounts.

A short account's market value decreases by $1 for every $1 of SMA to be created. The SMA balance would be $7,500 if the market value decreases by $5,000.

To learn more about SMA visit:

brainly.com/question/17189709

#SPJ4

5 0

1 year ago

FINANCIAL LITERACY WILL MARK BRAINLIEST PLS HELP ASAP!!