Question 23 Which of the following statements is CORRECT? Question 24 Which of the following bonds has the greatest interest rate price risk? Question 25 A 10-year bond pays an annual coupon, its YTM is 8%, and it currently trades at a premium. Which of the following statements is CORRECT? Question 26 Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as
At this price, the bonds yield 11.8 percent. The coupon rate on the bonds is percent. (Do not include the percent sign (%). Round your answer to 1 decimal place. (e.g., 32.1)) | Ackerman Co. has 10 percent coupon bonds on the market with sixteen years left to maturity.
15. Question: : (TCO D) On January 1, Martinez Inc. issued $3,000,000, 11% bonds for $3,195,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium.
ECO 372 FINAL EXAM 1. Consider if the government instituted a 10% income tax surcharge. In terms of the AS/AD model this change should have a. shifted the AD curve to the left b. shifted the AD curve to the right c. made the AD curve flatter d. made AD curve steeper 2. If the depreciation of a country’s currency increases it aggregate expenditures by 20, the AD curve will a. shift right by more than 20 b. shift right by less than 20 c. shift right by exactly 20 d. not shift at all 3. Suppose that consumer spending is expected to decrease in the near future.
Week 10 Problems 1. Given the following information: Total assets $100,000 Debt (12% interest rate) $80,000 Equity $20,000 Variable costs of production $14 per unit Fixed cost of production $27,000 Units Sold 12,300 Sales price $19.75 per unit What happens to operating income and net income if output is increased by 10 percent? Verify your answer. Revenue: $19.75*(12,300) = $242,925 Expenses: $14*(12,300) = $172,200 Operating Income: $242,925-$172,200 = $70,725 Net Income: $72,725- (.12*$80,000) = $63,125 With 10% increase in revenue: Revenue: $19.75*(13,530) = $267,217.50 Expenses: $14*(13,530) = $189,420 Operating Income: $267,217.50- $189,420 =$77,797.50 Net Income: $77,797.50 - (.12*$80,000) =$38,197.50 Operating Income rose from $70,725 to $77,797.50 for a 91% increase. Net income dropped from $63,125 to $38,197.50 which cuts losses by $24,927.50.
In total it will be $74,295; since the investors paid $80,000 the yield rate is less than 8%. As for the correctness of the $748 first year bond discount amortization, the calculation follows: Since the bond proceeds were $80,000 and the true yield is 7.23% per year. 7.23% came from the interest table that I have. Then for Year 1 net interest should be $80,000*.0723 =$5784. But the stated interest payment is $5,000, thus the $784 interest expense is amortization of the bond discount.
From this we know that a) Firm A has a higher profit margin than firm B b) Firm B has a higher profit margin than firm A c) Firm A and B have the same profit margin d) Firm A has a higher equity multiplier than firm B 16. If you deposit $15,000 per year for 9 years (each deposit is made at the beginning of each year) in an account that pays an annual interest rate of 8%, what will your account be worth at the end of 9 years? 17. You plan to accumulate $450,000 over a period of 12 years by making equal annual deposits in an account that pays an annual interest rate of 9% (assume all payments will occur at the beginning of each year). What amount must you deposit each year to reach your
C) The answers are different because if the interest is left untouched, it makes the principal amount higher each year, giving more money after 10 years. Compounded interest allows for more money that simple interest would. 2. A) If the individual retires at the age of 65, having started the program at age 40, there would be $219,318 in the account. $3,000 x (8% in 25 years) 3000 x 73.106 = $219,318 B) If
A dollar today is worth more than a dollar to be received in the future because-the dollar can be invested today and earn interes If you were to put $1,000 in the bank at 6% interest each year for the next 10 years, which table would you use to find the ending balance in your account? - compound sum of an annuity of $1 The FVIFA for the future value of an annuity is 4.5 at 10% for 4 years. If we wish to accumulate $8,000 by the end of 4 years, how much should the annual payments be?-. $1,778 Under what conditions must a distinction be made between money to be received today andmoney to be received in the future?- when idle money can earn a positive return An annuity may be defined as-a series of consecutive payments of equal An annuity may be defined as-a series of consecutive payments of equal amounts. You are to receive $12,000 at the end of 5 years.
The rental price of capital? The real wage? c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent. What happens to total output (in percent)? The rental price of capital?