judywilkerson1114
21.10.2020 •
Business
Now, consider the situation in which Olivia wants to earn a return of 3.00%, but the bond being considered for purchase offers a coupon rate of 6.00%. Again, assume that the bond pays semiannual interest payments and has three years to maturity. If you round the bonds intrinsic value to the nearest whole dollar, then its intrinsic value of (rounded to the nearest whole dollar) is its par value, so that the bond is
Solved
Show answers
More tips
- A Animals and plants 10 Tips for Growing Delicious and High-Quality Tomatoes in Your Garden...
- H Health and Medicine Tick Traps: How to Remove Them Safely and Effectively...
- F Family and Home How to Keep Your Home Warm: Tips and Tricks...
- C Computers and Internet How Much Does an iPhone Cost in America?...
- S Style and Beauty Discover the Art of Nail Design: How Do You Paint Your Nails?...
- F Food and Cooking Discover How to Properly Prepare Dough for Rasstegai...
- F Family and Home Ways to Attract Wealth into Your Home...
- G Goods and services Stock center - a modern way of optimizing logistics...
- F Family and Home How to Teach Your Child to Read?...
- F Food and Cooking How to properly cook shrimp: tips from professionals...
Answers on questions: Business
- B Business Which of the following statements about check cashing companies is FALSE? They can take a percentage of your check on top of fees. They charge low fees. They offer bad deals...
- B Business Assume Simple Co. had credit sales of $257,000 and cost of goods sold of $157,000 for the period. Simple uses the percentage of credit sales method and estimates that 2 percent...
- B Business Suppose that you were the manager of a large retail store that was currently experiencing a shoplifting problem. Every hour, approximately $15 worth of merchandise was being...
- B Business The LP problem whose output follows determines how many necklaces, bracelets, rings, and earrings a jewelry store should stock. The objective function measures profit; it...
- B Business Necesito ayudaa porfavo. c)Piensen otros tres ejemplos donde la actividad metabólica de un organismo se ve afectada por presiones del medio. Porfis ayuda....
- B Business g Tawstir Corporation has 700 obsolete personal computers that are carried in inventory at a total cost of $1,071,000. If these computers are upgraded at a total cost of $42,700,...
- B Business Victoria Enterprises expects earnings before interest and taxes (EBIT) next year of $ 2.5 million. Its depreciation and capital expenditures will both be $ 295 comma 000,...
- B Business A firm uses only debt and equity in its capital structure. The firm s weight of equity is 75 percent. The firm s cost of equity is 16 percent and it has a tax rate of 30 percent....
- B Business Violet Sales Corp, reports the yearminusend information from 2019 as follows: Sales (35 comma 375 units) $ 283 comma 000 Cost of goods sold 114 comma 000 Gross margin 169...
- C Chemistry 1.28 g of copper is combined with 110 g of sulfur according to the reaction below: 2Cu + S - Cu2S. Calculate the number of moles of copper sulfide that will be produced in...
Ответ:
Intrinsic value = $1085.87
Explanation:
Annual Rate of return = 3.00%
Annual Coupon rate = 6.00%
Now, consider the situation in which Olivia wants to earn a return of 3.00%, but the bond being considered for purchase offers a coupon rate of 6.00%. Again, assume that the bond pays semiannual interest payments and has three years to maturity. If you round the bonds intrinsic value to the nearest whole dollar, then its intrinsic value of $1085.87 (rounded to the nearest whole dollar) is HIGHER THAN its par value, so that the bond is TRADING AT PREMIUM
Intrinsic value =
= 30/ (1.015) + 30/(1.015)^2 + ------- + 30/ (1.015)^6 + 1000/(1.015)^6
= 29.56 + 30/1.030 + 30/1.046 + 30/1.061 + 30/1.077 + 30/1.093 + 1000/1.093
= 29.56 + 29.126 + 28.68 + 28.275 + 27.855 + 27.447 = $170.96 + $914.91
= $1085.87
Bond's par value = $1000
annual coupon rate = 6% = 0.06
semiannual coupon rate = 3% = 0.03
semiannual coupon ( A ) = 0.03 * $1000 = $30
Annual rate of return = 3% = 0.03
semi-annual rate of return ( C )= 1.5% = 0.015
Ответ:
are u spamming questions?
Explanation: