Who here plays 7ds grandcross

The following statements are true. Explain why. a. If a bond’s coupon rate is higher than its yield to maturity, then the bond w

krok68 [10]

Answer:

A Bond's current market value represented by $B_{0}$ is the present value of a bond as on today. Present value of a bond is it's future cash flows in the form of coupon payments and principal repayment discounted at investor's expectation in the market also referred to as Yield to maturity(YTM).

Present value of a bond is given by the following equation,

$B_{0} = \frac{C}{(1\ +\ YTM)^{1} } +\ \frac{C}{(1\ +\ YTM)^{2} } \ +\ ......+\ \frac{C}{(1\ +\ YTM)^{n} } \ +\ \frac{RV}{(1\ +\ YTM)^{n} }$

where C= Annual coupon payments

YTM = Yield to maturity/ cost of debt/ market rate of return on similarly priced bonds

RV = Redemption value of bond

n = number of years to maturity

a. A bond's coupon rate is higher than it's yield to maturity, then the bond will sell for more than face value.

Hence, if the company pays more interest than what is paid in the market on similarly priced bonds, such bonds shall sell at more than their face value.

b. If a bond's coupon rate is lower than it's yield to maturity, then the bond's price will increase over it's remaining maturity.

Similarly, if a bond pays lower rate of interest than the market rate of interest on similarly priced bonds, the bond shall sell at lower than it's face value and the price will increase over the remaining life of such bonds.

6 0

3 years ago

Tracy and Lance, equal shareholders in Macaw Corporation, receive $600,000 each in distributions on December 31 of the current y

Lorico [155]

Answer:

B. $300,000

Explanation:

Macaw Corporation increased its E & P last year for the entire amount of the deferred gain on the installment sale. Since one-half of the $800,000 gain is included in taxable income in the current year, taxable income should be reduced by this amount to determine current E & P. Therefore, Macaw Corporation’s current year E & P is $600,000 ($1 million taxable income – $400,000 of installment sale gain). Because one-half of the current E & P is allocated to Tracy’s distribution, she has a $300,000 dividend

6 0

3 years ago

If a egg need 5 mins to cook how many mins 7 eggs need to cook

denis23 [38]

35 its just 5 x 7 you multiply the number of eggs by how many minutes.

6 0

3 years ago

An airport needs a modern material handling system for facilitating access to and from a busy maintenance hangar. A second-hand

Arlecino [84]

Answer:

The second hand machine should be chosen given that the NPV value is lower than that of the new system

Explanation:

cost of second hand system = $75,000

cost of new system = $150,000

New system can decrease labor hours by 20%

number of useful life ( for both systems ) = 5 years

market value of second hand system after 5 years = $20,000

market value of new system after 5 years = $50,000

Second hand system can operate for 8 hours/day for 20 days = 8*20 = 160 hours per month = 1920 hours per year

labor cost = $40 per hour

MARR = 1% per month

Determine the system that should be recommended

we have to calculate the NPV for both options

for Option 1 ( second hand system )

labor cost = 40 * 1920 = $76800

cost of purchase = $75,000

MARR = 12% p.a.

residual value = $20000

First step : calculate the PV of maintenance cost = $76800× PVAF(12%, 5 years) = $276864

Next : calculate the PV of residual value =$20000× PVF(12%, 5th year)

= $11340

NPV = (75000 + 276864 - 11340 ) = $340,524

for Option 2 ( New Machine )

Labor cost = ( 1920 × 0.8 )hours ×40 = $61440

cost of machine = $150000

Pv of labor cost = 61440×3.605 = $221491.20

Residual value = $50,000

Hence ; PV of residual value = 50000 × 0.567 = $28350

Finally calculate the NPV = (150000+221491.20-28350) = $343,141.20

7 0

3 years ago

An investor who owns a bond with a 9% coupon that pays interest semi-annually and matures in three years is considering its sale

tino4ka555 [31]

Answer:

0

Explanation:

7 0

3 years ago