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You did not post the complete question so I will write only the missing components below that is needed to answer the question and some important definitions.
Definitions:
PVIFA - present value interest factor of annuity
= number of regular intervals per year at which time the borrowed amount is to be paid back
= annual interest rate
= number of years to payoff the debt
We need to find the interest rate that equates the price we paid for the bond with the cash flows we received. The cash flows we received were $100 each year for two years and the price of the bond when we sold it. Also, remember the YTM on the bond has declined by 1 percent.
Let us assume a par value of $1,000. we need to find the price of the bond in two years. The price of the bond in two years, at the new interest rate, will be:
$100(PVIFA8.42%,17) + $1,000(PVIF8.42%,17) = $1,139.69
Answer:
Therefore, the bond will sell for $ 1,139.69 ± 0.1%
Answer:
A. The total production of bread and wine rises
Explanation:
<u>Note: The question appeared incomplete as neither John's nor Jane's production efficiency is provided. A similar question has been attached for reference purpose upon which this answer is based</u>.
Jane takes 2hrs for making a bottle of wine while John takes 3 hours for preparing a bottle of wine. Hence Jane is more efficient in production of wine than John and if Jane devotes more hours to wine production, the production of wine shall rise.
Similarly, John is more efficient in production of bread as he takes 1 hour for producing a loaf of bread against Jane who takes longer i.e 1.5 hours. Thus, if John devotes more time in preparing bread, the production of bread shall rise.
Hence, the correct answer is (A). The total production of bread and wine each rises.
