The study of economics focuses most on...

Consider these long-term investment data: • The price of a 10-year $100 par zero-coupon inflation-indexed bond is $84.49. • A re

AleksAgata [21]

Answer:

Annual rate 0.017

Explanation:

Computation of the annual rate on the real bond.

Using this formula

Annual rate = Par Zero coupon inflation index/(1+r) ^Numbers of years =Inflation-indexed bond

Let plug in the formula

Annual rate=100 / (1 + r) ^10 = 84.49

Annual rate= (100 / 84.49)^1 /10 − 1

Annual rate=(1.18357)^0.1-1

Annual rate=1.016-1

Annual rate=0.017

Therefore the annual rate of return will be 0.017

3 0

3 years ago

Read 2 more answers

The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear belo

slamgirl [31]

Answer:

Net loss of $24,600

Explanation:

Sales $773,900

Variable Expenses ($402,100)

Contribution Margin $371,800

Avoidable Expenses of B90D

Fixed Manufacturing Expenses $186,000

Fixed Selling and Admin Expenses %161,200

Total Avoidable expenses $347,200

If the product B90D is discontinued,the contribution margin of $371,800 will be lost by Wengel corporation and costs of $347,200 will be saved.

Therefore there will be net loss of $(371,800-347,200) $24,600 to the company if the product is discontinued.

3 0

3 years ago

Concord Corporation has beginning work in process inventory of $164000 and total manufacturing costs of $486000. If cost of good

bazaltina [42]

Answer:

a. $190000.

Explanation:

begining WIP 164,000

Total cost added during the period <u> 486,000 </u>

total cost to be accounted for: 650,000

cost of goods manufactured <u> (460,000) </u>

ending Work In process 190,000

The ending WIP will be the cost of the unfinished goods.

The beginning and the cost added during the period, will be the total cost to be accounted for.

Then the cost of goods manufactured is subtracted as, these are transferred-out to finished goods.

4 0

3 years ago

A newly issued bond has a maturity of 10 years and pays a 7.5% coupon rate (with coupon payments coming once annually). The bond

nadya68 [22]

Bond

Explanation:

Bond price = B = Face value = F = $100 (Because the bond sells at par value.)

Time to maturity = n = 10 years

Number of periods in a year = p = 1 (annual coupon payments)

Coupon rate = C = 7.5% = 7.5%*100 = $7.5

Yield = r = 7.5% (since bond is selling at par hence the coupon rate = yield)

Duration and Convexity:

Duration is a used as a measure of risk because it provides the average length of time by when the bond holder will receive their payments made. Longer the duration, longer is the time to receive the payments and hence higher the risk.

Expanding the summation and solving for Convexity, we get,

Period (t) Cash Flow PV = Cash Flow / (1+r/p)^(t*p) (t^2+t)*PV

1 7.5 6.97674418604651 13.953488372093

2 7.5 6.48999459167117 38.939967550027

3 7.5 6.03720427132202 72.4464512558643

4 7.5 5.61600397332281 112.320079466456

5 7.5 5.22418974262587 156.725692278776

6 7.5 4.85971138848918 204.107878316546

7 7.5 4.52066175673412 253.157058377111

8 7.5 4.20526675045035 302.779206032425

9 7.5 3.91187604693056 352.06884422375

10 7.5 3.63895446226098 400.284990848708

10 100 48.5193928301464 5337.13321131611

Sum of (t^2+t)*PV 7243.91686803787

Convexity = sum/(B*(1+r)^2) 62.6839750614418

Convexity = 62.6839750614418 = 62.684 (rounded to 3 decimal places as requested in the question)

5 0

3 years ago

2) The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of 2) $100 per year) is comm

-Dominant- [34]

Answer:

C) interest rate

Explanation:

Based on the scenario being described within the question it can be said that this price is commonly referred to as the interest rate. Like mentioned, this is the principal that is charged by the lender of the money to the borrower for the use of the borrowed money. This is usually charged as a percentage of the total amount that is being borrowed.

7 0

3 years ago

Read 2 more answers