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Ghella [55]
2 years ago
7

You have just bought a security that pays $500 every six months. The security lasts for 10 years. Another security of equal risk

also has a maturity of 10 years, and pays 10 percent compounded monthly (that is, the nominal rate is 10 percent). What should be the price of the security that you just purchased?.
SAT
1 answer:
Murljashka [212]2 years ago
6 0

Answer:

PV= $6,178.61

Explanation:

Giving the following information:

Number of years= 10

Cash flow= 500 semiannually

Discount rate= 10% compounded monthly

First, we need to calculate the semiannual interest rate:

i= 0.10/12= 0.00833

i= (1.00833^6) - 1= 0.051

Now, we need to calculate the final value of security:

FV= {A*[(1+i)^n-1]}/i

A= cash flow

FV= {500*[(1.051^20) - 1] / 0.051

FV= $16,708.79

Finally, the present value:

PV= FV/(1+i)^n

PV= 16,708.79/1.051^20

PV= $6,178.61

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Assume that we use a perpetual inventory system and that five identical units are purchased at the following four dates and cost
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The cost of ending inventory at the conclusion of an accounting period is calculated using the weighted average inventory costing method.

<h3>How is the cost of discontinuing inventory calculated?</h3>
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  • In this scenario, the average of the purchase costs from April 5 to April 22 would be taken and multiplied by the number of remaining units to get the cost of the ending inventory on the balance sheet.
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