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mylen [45]
2 years ago
10

Suppose we have a bond issue currently outstanding that has 20 years left to maturity. The coupon rate is 8%, and coupons are pa

id semiannually. The bond is currently selling for $828 per $1,000 bond. What is the cost of debt?
a. 8%
b. 9%
c. 10%
d. 11%
e. 1296
Business
1 answer:
ser-zykov [4K]2 years ago
7 0

Answer:

The answer is C.

Explanation:

The coupon payment is annual, meaning it is being paid once a year.

N(Number of years/Number of periods) = 40(20 x 2)

I/Y(Yield-To-Maturity) = ?

PMT(coupon payment) = $40[(80÷2/100) x $1,000]

FV(Future value/Par value) =$1,000

PV(present value or market value) = -828

Now to solve this, lets use a financial calculator (e.g Texas BA II plus)

N= 40; I/Y = ?; PMT = $40; FV = $1,000; CPT PV = -828

The cost of debt is 5%

Note that this is for semiannual. The annual cost of debt is therefore, 10%(5% x 2)

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ehidna [41]

A traditional cover letter’s format includes an introduction, a body and a closing paragraph.

4 0
3 years ago
An anticipated purchase of equipment for $1,000,000, with a useful life of eight years and no residual value, is expected to yie
exis [7]

Answer:

3 years

The average rate of return method includes the entire amount of the income earned over the life of the proposal.

a. rate of return on investments

b. may be reconsidered if funds later become available.

Explanation:

Cash payback period measures how long it takes to recover the amount invested in a project from the cumulative cash flow.

Amount invested = $-1,000,000

Amount recovered in year 1 = $-1,000,000 + $400,000 = $-600,000

Amount recovered in year 2 = $-600,000 + 320,00 = $-280,000

Amount recovered in year 3 = $-280,000 + 280,000 = 0

The amount invested is recovered In the 3 year

Average accounting rate = average net income/ average book value

Net present value is the present value of after tax cash flows from an investment less the amount invested. The interest rate used is the rate of return on investments.

The hurdle rate is the least acceptable rate that a project can have for it to be acceptable.

I hope my answer helps you

8 0
2 years ago
Q 8.2: On June 15th, Buehler Company sells merchandise on account to Chaz Co. for $1,000, terms 2/10, n/30. On June 20th, Chaz C
Pavel [41]

Answer:

C : $686

Explanation:

The computation of the cash received amount is shown below:

= (Sale value of merchandise - returned merchandise) × (100 - discount rate)

= ($1,000 - $300) × (100 - 2%)

= $700 × 98%

= $686

Since the payment is made within 30 days, so the company could avail the discount of 2% and the return goods should be deducted so that the actual amount of cash received can come.

8 0
3 years ago
Terms of trade Suppose that Greece and Germany both produce oil and stained glass. Greece's opportunity cost of producing a pane
Pepsi [2]

Answer:

Greece has a comparative advantage in the production of stained glass.

Germany has a comparative advantage in the production of oil.

Greece can gain from specialization and trade as long as it receives more than 4 barrels of oil.

Germany can gain from trade as long as it receives more than 0.1 pane of stained glass.

Trade price in this situation will be 8 barrels of oil per pane of stained glass and 6 barrels of oil per pane of stained glass.

Explanation:

Greece and Germany both produce oil and stained glass.

Greece's opportunity cost of producing a pane of stained glass

= 4 barrels of oil

Germany's opportunity cost of producing a pane of stained glass

= 10 barrels of oil

Greece has a comparative advantage in the production of stained glass as it has lower opportunity cost.

Greece's opportunity cost of producing a barrel of oil

= \frac{1}{4}

= 0.25 pane of stained glass

Germany's opportunity cost of producing a barrel of oil

= \frac{1}{10}

= 0.1 pane of stained glass

Germany has a comparative advantage in the production of oil as it has lower opportunity cost.

Greece can gain from specialization and trade as long as it receives more than 4 barrels of oil. Germany can gain from trade as long as it receives more than 0.1 pane of stained glass.

Both the countries will gain from trade if the trade price lies between their opportunity cost. So trade price in this situation will be 8 barrels of oil per pane of stained glass and 6 barrels of oil per pane of stained glass.

4 0
3 years ago
Household​ production, such as baking bread at​ home, is not included in GDP because it
Mariulka [41]

Answer:

The correct answer is option D.

Explanation:

GDP can be defined as a measure to calculate the economic growth of a nation. It includes the production of final goods and services in the geographical boundaries of a nation.

It does not include home production of goods and services, this is because such goods and services do not involve a market transaction. For instance, if a person is baking bread at home he/she is not being paid for it by anyone.

6 0
3 years ago
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