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puteri [66]
3 years ago
15

A 10-year, 9.00%, $3,000 bond that pays dividends quarterly can be purchased for $2,775. This means that $2,775 is spent on the

bond now. Every quarter, $67.50 is provided to the purchaser as to the dividend. After 10 years, $3,000 is given to the purchaser. If the bond is purchased and pays as scheduled, which of the following ranges of effective rate of return will the purchaser receive?
a. 10.2% - 11.2%
b. 9% - 9.5%
c. 11.21% - 13.21%
d. 9.5% - 9.95%
Business
1 answer:
Rainbow [258]3 years ago
3 0

Answer:

The range of effective rate of return that the purchaser will receive would be between 10.2% - 11.2%. The right answer is a

Explanation:

According to the given data we have the following:

Quarterly dividend = $67.50

Buy price = $2,775

Maturity = 10 yrs = 10*4 = 40 quarters

Face value = $3000

Hence, PW = -2775 + 67.50 * (P/A,i%,40) + 3000*(P/F,i%,40) = 0

67.50 * (P/A,i%,40) + 3000*(P/F,i%,40) = 2775

Therefore, using trail and error method

When i = 2.5%, value of 67.50 * (P/A,i%,40) + 3000*(P/F,i%,40) = 2811.729

When i = 3%, value of 67.50 * (P/A,i%,40) + 3000*(P/F,i%,40) = 2479.917

And by using interpolation

i = 2.5% + (2811.729-2775) / (2811.729-2479.917) *(3-2.5)

i = 2.5% + 0.05534%

i = 2.555%

Nominal yeild = 2.555% * 4 = 10.22%

Effective yeild = (1+0.02555)^4 - 1 = 0.10618 = 10.62%

The range of effective rate of return that the purchaser will receive would be between 10.2% - 11.2%

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Tatiana [17]

Explanation:

The journal entries are shown below:

a. Inventory Dr $23,500

           To Account payable $23,500

(Being inventory purchased on credit)

b. Account payable Dr $4,200

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(Being the return of the inventory is recorded)

c. Account payable Dr $19,300

           To Cash $19,300

(Being the payment of the invoice is recorded)

3 0
3 years ago
According to the video congressional earmarks, the trading of votes by members of congress to obtain passage of projects that ar
sineoko [7]
<span>the trading of votes by members of congress to obtain passage of projects that are of interest to one another is referred to as: Logrolling
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8 0
3 years ago
________differentiation is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived
Andreas93 [3]

Answer:

A) Product Differentiation

Explanation:

Product differentiation is referred as a strategy which companies or firms use to showcase the abilities which their products have and the competing product does not have. Some go as far as displaying an added advantage which their products have. Forms which this strategy can take may be through price of the product, reliability of the product or location of the product.

8 0
3 years ago
The Nearside Co. just paid a dividend of $1.20 per share on its stock. The dividends are expected to grow at a constant rate of
timurjin [86]

Answer:

$20.80 and $29.61

Explanation:

The computations are shown below:

Current price is

= Next year dividend ÷ (Required rate of return - growth rate)

where,

Next year dividend is

= $1.20 + $1.20 × 4%

= $1.20 + $0.048

= $1.248

So, the current price is

= $1.248 ÷ (10% - 4%)

= $20.80

Now the price in 10 years is

= Next year dividend ÷ (Required rate of return - growth rate)

where,

Next year dividend is

= $1.20 × 1.04^10

= $1.20 × 1.4802442849

= $1.7762931419

So, the price in 10 years is

= $1.7762931419  ÷ (10% - 4%)

= $29.61

4 0
3 years ago
During 2017 the DLD Company had a net income of $85,000. In addition, selectedaccounts showed the following changes: Accounts Re
miv72 [106K]

Answer:

A) $84,500

Explanation:

The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.

The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.  

The sale of assets, interest received, purchase of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.

Hence, amount of cash provided by operating activities

= -$3,000 + $1,000 + $1,500 + $85,000

= $84,500

The increase in asset other than cash is an outflow, increase in liability is an inflow of cash. Depreciation is a non-cash item added back while increase in building and bond payable are investing and financing activities respectively.

7 0
3 years ago
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