3. In this problem the bond sells for a premium, which indicates that interest rates have...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3. In this problem the bond sells for a premium, which indicates that interest rates have declined. The current yield is $70/$1,222 = 5.73%. To confirm that interest rates have declined, determine the yield to maturity. Since the current yield is 5 percent, that rate may be used as a starting point: $1,222 $70 (1 + .05) + 70 (1 + .05) + + Thus the yield to maturity slightly exceeds 5 percent. 70 (1 + .05) 20 $70(12.462) + 1,000(0.377) = $1,249. + 1,000 (1 + .05) 2 N = 20; PMT= 70; FV = 1000; PV = -1222; I = ? = 5.2 3. In this problem the bond sells for a premium, which indicates that interest rates have declined. The current yield is $70/$1,222 = 5.73%. To confirm that interest rates have declined, determine the yield to maturity. Since the current yield is 5 percent, that rate may be used as a starting point: $1,222 $70 (1 + .05) + 70 (1 + .05) + + Thus the yield to maturity slightly exceeds 5 percent. 70 (1 + .05) 20 $70(12.462) + 1,000(0.377) = $1,249. + 1,000 (1 + .05) 2 N = 20; PMT= 70; FV = 1000; PV = -1222; I = ? = 5.2
Expert Answer:
Answer rating: 100% (QA)
Okay lets solve this using the financial calculator Giv... View the full answer
Related Book For
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo
Posted Date:
Students also viewed these finance questions
-
brandlin company of anaheim, california, sells parts to a foreign customer on december 1, 2017, with payment of 28000 koruna reg a1 reg a2 to a4 reg b1 reg b2 to b4 a2 what is the impact on 2017 net...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
1.Hope Corporation bonds bearing a coupon rate of 12%, pay coupons semiannually, have 3 years remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity? 2....
-
Suppose the following chart illustrates the domestic prices of three items (shoes, watches, and electric motors) of similar quality in the United States and Mexico. If one dollar exchanges for five...
-
As a simple pendulum swings back and forth, the forces acting on the suspended object are the gravitational force, the tension in the supporting cord, and air resistance. (a) Which of these forces,...
-
An engineering firm is hired to determine if certain waterways in Virginia are safe for fishing. Samples are taken from three rivers. (a) List the elements of a sample space S, using the letters F...
-
The inexperienced finance trainee at Mugs-R-Us plc says that he can save the company money on its forthcoming issue of ten-year bonds. The rate of return required for bonds of this risk class in the...
-
A furniture company manufactures tables and chairs. Each table and chair must be made entirely out of oak or entirely out of pine. A total of 15,000 board feet of oak and 21,000 board feet of pine...
-
Your employer offers a 401(k) plan with a 27% match, and you set a goal of retiring in 32 years with an amount of money which has the same buying power that 1.4 million dollars has today. If the...
-
Given two arrays each of length n, arr1, and arr2, in one operation, any two elements of an array can be swapped. This can occur any number of times. Find the maximum possible sum of i*(arr2[1]-...
-
On July 1 of the current year F purchased a franchise and commenced operating a new business as a sole proprietor. The franchise cost $ 1 0 0 , 0 0 0 and has a 1 0 - year term. What is the maximum...
-
A coaxial cable consists of an inner conducting cylinder of radius a and an outer conducting cylinder of radius 5a. A current / flows down the length of the inner cylinder and back along the length...
-
How have advancements in membrane technology impacted extraction processes? Explore the use of membrane-based methods like pervaporation and membrane distillation in the extraction and purification...
-
Oriole Company sells a snowboard, WhiteOut, that is popular with snowboard enthusiasts. Presented below is information relating to Oriole Company's purchases of White Out snowboards during September....
-
The graph below depicts the wholesale market for corn. A new govenment regulation is put in plave that requires gasoline producers to include more ethanol when producing unleaded gasoline. 1. The...
-
Considering the various uncontrollable environments that affect organizations, choose an industry and identify how each of the following might generally affect global supply chains: (a) economic; (b)...
-
The table contains data for room turnaround time by the cleaning staff at the BlackJack/Simpson clinic. Sixty-two trials were conducted with three samples apiece. The clinic manager has heard of a...
-
Cleaning Service Company's Trial Balance on December 31, 2020 is as follows: Account name Debit Credit Cash 700 Supplies Pre-paid insurance Pre-paid office rent Equipment Accumulated depreciation -...
-
Management of TSC, Inc. is evaluating a new $90,000 investment with the following estimated cash flows: Year Cash Flow 1......... $10,000 2......... 25,000 3......... 40,000 4......... 50,000 If the...
-
A commercial bank offers you a $200,000 annual line of credit with the following terms: origination fee: $2,000 paid when the line is accepted fees: 1 percent on unused balance, paid at the end of...
-
To increase sales, management is considering reducing its credit standards. This action is expected to increase sales by $125,000. Unfortunately, it is anticipated that 7 percent of the sales will be...
-
A decrease in supply results in a(n) _________ equilibrium price and a(n) _________ equilibrium quantity.
-
If supply decreases and demand increases, the equilibrium price will _________ and the equilibrium quantity will be _________.
-
If demand decreases and supply increases, but the decrease in demand is greater than the increase in supply, the equilibrium quantity will _________.
Study smarter with the SolutionInn App