Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1 . Sarah and Mark Hoffland have total take - home pay of $ 3 , 2 0 0 a month. Their average monthly expenses

1. Sarah and Mark Hoffland have total take-home pay of $3,200 a month. Their average monthly expenses are $2,800. Calculate the minimum amount this couple needs to establish as an emergency fund.
2. At the beginning of the year, Kenma has the following investment choices. Ignoring tax, determine the return for each investment and advise Kenma of the benefit and risk of each option assuming they are risk averse.
a.100 shares in a publicly traded company that cost a total of $2,600 and pay an annual dividend of $0.50 per share. The investment value is not anticipated to change during the year.
b. Bonds of a publicly traded company that cost a total of $2,600 and pay annual interest of 1.6%. The investment value is not anticipated to change during the year.
c. A one-year GIC from a chartered bank that costs $2,600 and pays annual interest of 1.5%.
3. Assume that three years ago, Samiya purchased a 10-year corporate bond that pays 9.5%. The purchase price was $1,000. Also, assume that today the comparable bonds are paying 8%.
a. What is the annual dollar amount of interest that Samiya would receive from her bond investment?
b. Assuming that comparable bonds are paying 8%, what is the approximate market price for which she could sell her bond?
c. Did the bond increase or decrease in value?
d. Why did the bond increase or decrease in value?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Investments

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

8th Edition

0077606779, 978-0697789945

More Books

Students also viewed these Finance questions

Question

If P(A) 0.4, P(B) 0.5, and P(A and B) 0.1, find P(A or B).

Answered: 1 week ago

Question

Discuss the impact of religion on individual behavior.

Answered: 1 week ago

Question

Azure batch automatically scales depending on the traffic.

Answered: 1 week ago

Question

25.0 m C B A 52.0 m 65.0 m

Answered: 1 week ago