Suppose you came into some money and looking for a bond to invest in. You found a $1,000, with 15 years left to maturity bond. If the bond has a 6% coupon rate but pays interest semi-annually and you require a 13% return on your investment, how much are you willing to pay for the bond? (Round your answer to two decimal point)

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Answer 1

To calculate the price you are willing to pay for the bond, you need to use the present value formula:


PV = C[(1 - (1 + r)^-{n})/r] + FV/(1 + r)^{n}



Where:


PV = Present value (what you are willing to pay for the bond)


C = Coupon payment (in this case, half the coupon rate or 3%)


r = Required rate of return (13%/2 or 6.5%)


n = Number of periods (15 years x 2 since the bond pays semi-annually or 30)



Plugging in the values:

PV = 30[(1 - (1 + 0.065)^{-30})/0.065] + 1000/(1 + 0.065)^{30}


PV = $707.20

Therefore, you are willing to pay $707.20 for the bond if you require a 13% return on your investment.

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Related Questions

what are the sources of demand in an mrp system? are these dependent or independent, and how are they used as inputs to the system?

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In a material requirements planning (MRP) system, the sources of demand are the orders placed by customers or the forecasts of future demand. These sources of demand are used to calculate the quantity and timing of the materials needed to produce finished goods.

The sources of demand in an MRP system can be categorized into two types: dependent and independent demand.

Independent demand: This refers to the demand for finished goods or end products, which is typically uncertain and difficult to forecast. Independent demand arises from the customer orders or market forecasts for finished goods. Independent demand is not related to the demand for other components or subassemblies within the production process.

Dependent demand: This refers to the demand for components, raw materials, and subassemblies that are needed to produce finished goods. Dependent demand is calculated based on the demand for finished goods and the bills of materials (BOM) that specify the quantities of each component required to produce a finished product. Dependent demand is directly related to the production schedule and inventory levels of the finished goods.

Both independent and dependent demands are used as inputs to the MRP system to determine the timing and quantity of materials required to meet the production schedule. The MRP system uses these demands to generate a production plan and a materials procurement plan that specifies the quantity and timing of the materials needed to fulfill the production schedule. The MRP system also considers inventory levels and lead times for each material to ensure that the required materials are available when needed. By balancing the supply of materials with the demand for finished goods, the MRP system helps to optimize the production process and ensure that the required materials are available to meet customer demand.

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The sources of demand in an MRP (Material Requirements Planning) system are primarily two types:

1. Dependent demand: This refers to the demand for components, parts, or subassemblies that are required to manufacture or assemble a finished product. Dependent demand is derived from the production schedule for the finished product, and it is calculated based on the bill of materials (BOM) for the finished product. The BOM specifies the quantity and type of materials required to manufacture each finished product unit. Dependent demand is a derived demand because it is dependent on the demand for the finished product.

2. Independent demand: This refers to the demand for finished products that are sold to customers or used for inventory replenishment. Independent demand is not derived from any other demand and is usually unpredictable. It is based on market demand, customer orders, or forecasts.

Both dependent and independent demands are used as inputs to the MRP system to calculate the materials, components, and subassemblies required to fulfill the production schedule for the finished product. The MRP system uses the BOM and the production schedule to calculate the quantity and timing of each component required to produce the finished product. The MRP system also considers inventory levels, lead times, and supplier schedules to ensure that the necessary materials and components are available when required for production. The system generates purchase orders or work orders to initiate the procurement and production of the required materials and components.

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the loanable funds market in an economy is in equilibrium. draw a correctly labeled graph of the loanable funds market, labeling the equilibrium real interest rate and the equilibrium quantity. show the impact of a decrease in the money supply for this economy in your graph from part (a). will the result be a shortage or surplus in the loanable funds market at the original equilibrium? will lenders of existing fixed-rate loans be better or worse off as a result of the change in the real interest rate? how will investment spending on facilities and equipment in this economy be impacted? explain.

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The loanable funds market is where savers provide funds for borrowers to use for investment purposes.

What's loanable funds

In equilibrium, the quantity of loanable funds supplied equals the quantity demanded. This is represented by a graph with the real interest rate on the y-axis and the quantity of loanable funds on the x-axis. The supply and demand curves intersect at the equilibrium real interest rate and equilibrium quantity.

A decrease in the money supply shifts the supply curve for loanable funds to the left, as there are fewer funds available for lending. This leads to a higher real interest rate and a lower quantity of loanable funds at the new equilibrium point.

At the original equilibrium, there is now a shortage of loanable funds, as the quantity demanded exceeds the quantity supplied. Lenders of existing fixed-rate loans are worse off, as the real interest rate increases, reducing the value of their existing loans.

Investment spending on facilities and equipment is negatively impacted, as the higher real interest rate discourages borrowing and investment due to increased borrowing costs. This may lead to reduced economic growth in the long run.

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Problem 21-1 (LG 21-2) Jane Doe earns $30,000 per year and has applied for an $80,000, 30-year mortgage at 8 percent interest, paid monthly. Property taxes on the house are expected to be $1,200 per y ear. if her bank requires a gross debt service ratio of no more than 30%, will Jane be able to obtain the mortgage?

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Jane's GDS ratio is below the bank's requirement of 30%, she should be able to obtain the $80,000 mortgage at 8% interest, paid monthly.

To determine if Jane Doe can obtain the mortgage, we first need to calculate her monthly gross income and monthly housing expenses.

Jane's monthly gross income can be calculated as follows:

$30,000 / 12 months = $2,500 per month

Next, we need to calculate her monthly housing expenses. This includes the monthly mortgage payment and property taxes. The monthly mortgage payment can be calculated using the following formula:

[tex]M = P [ i(1 + i)^n ] / [ (1 + i)^n - 1][/tex]

where M is the monthly mortgage payment, P is the principal amount of the mortgage, i is the monthly interest rate, and n is the number of months in the mortgage term.

For Jane's mortgage, we have:

P = $80,000

i = 8% / 12 = 0.0067

n = 30 years * 12 months per year = 360 months

Plugging in these values, we get:

[tex]M = $80,000 [ 0.0067(1 + 0.0067)^{360 }] / [ (1 + 0.0067)^{360 - 1 ][/tex]= $587.82 per month

Adding the property taxes, we have:

$587.82 + ($1,200 / 12) = $687.82 per month

Finally, we can calculate Jane's gross debt service ratio (GDS) by dividing her monthly housing expenses by her monthly gross income and multiplying by 100%:

GDS = ($687.82 / $2,500) x 100% = 27.51%

Since Jane's GDS ratio is below the bank's requirement of 30%, she should be able to obtain the $80,000 mortgage at 8% interest, paid monthly.

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some economists argue that regional free trade agreements will provide global benefits only if

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Some economists argue that regional free trade agreements will provide global benefits only if trade creation exceeds trade diversion.

Free trade agreements (FTAs) are agreements reached between two or more countries on a range of topics, such as investor protections, intellectual property rights, and responsibilities influencing trade in goods and services. It could require keeping more records to be able to receive FTA benefits for your product, but it could provide it a competitive edge against products from other countries.

Each FTA has unique features, but they all generally have the same goal of lowering trade barriers and promoting more secure and open business and investment environments. Free trade agreements (FTAs) make it possible for American exporters and manufacturers to gain greater access to other markets. Tariffs are decreased or eliminated, trade barriers are removed through bilateral and global agreements, and economic growth is promoted.

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cars inc., a company that manufactures toy cars, originally marketed its products as being suitable for young boys. recently, it drastically changed its advertising methods to include girls within its target group. the company's advertisements now depict its products as being suitable for both girls and boys. what strategy did cars, inc. implement?

Answers

The strategy that Cars Inc. implemented is called market segmentation expansion or diversification.

Market segmentation is the process of dividing a market into smaller groups of consumers with similar needs or characteristics. In this case, Cars Inc. originally segmented their market by gender, targeting young boys with their toy cars. However, the company realized that they could expand their market by also targeting young girls.

By changing their advertising methods to include girls within their target group, Cars Inc. implemented a diversification strategy. Diversification is a growth strategy that involves expanding a company's business into new markets or product lines. In this case, Cars Inc. expanded their market segment to include young girls, thereby diversifying their customer base and potentially increasing their revenue.

Overall, by changing its advertising methods to include girls within its target group, Cars Inc. implemented a diversification strategy to expand its market segmentation and increase its potential customer base.

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abc bank offers to lend you $50,000 for one year at a quoted annual rate of 8.31% with each payment at the end of each month. def bank also offers to lend you the same amount at a quoted annual rate of 8.63%, with each payment at the end of each quarter. what is the difference in the effective annual rates charged by the two banks? group of answer choices 0.22% 0.24% 0.26% 0.30% 0.28%

Answers

The difference in the effective annual rates charged by the two banks is 0.30%.

How to determine the effective annual rate (EAR)

To calculate the effective annual rate (EAR) for each bank, we need to consider the compounding frequency.

For ABC Bank, the compounding period is monthly, so we use the formula (1 + r/n)^n - 1, where r is the quoted annual rate and n is the number of compounding periods.

Plugging in the numbers, we get an EAR of 8.573%.

For DEF Bank, the compounding period is quarterly, so we use the same formula with n = 4.

Plugging in the numbers, we get an EAR of 8.870%.

To find the difference in the effective annual rates, we subtract the EAR of ABC Bank from the EAR of DEF Bank:

8.870% - 8.573% = 0.297% or 0.30% (rounded to the nearest hundredth)

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Explain the critical aspects of preparing a capital budget proposal and its biggest risks?

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Preparing a capital budget proposal involves identifying investment opportunities, estimating cash flows, calculating NPV and IRR, and conducting sensitivity analysis.

The proposal should include a detailed description of the project, its expected benefits, the estimated costs, and the timeline for completion. It should also consider potential risks and uncertainties, such as changes in market conditions, unexpected costs, and the potential for the project to fail.

The biggest risks associated with preparing a capital budget proposal are related to inaccurate estimates and inadequate analysis of potential risks. Poorly estimated cash flows, incorrect assumptions about the project's useful life or potential benefits, and insufficient consideration of external factors can lead to an incorrect assessment of the project's financial feasibility.

In addition, inadequate risk analysis can result in the failure to identify and mitigate potential risks, leading to unexpected costs, delays, and other negative consequences. It is crucial to carefully evaluate potential investments and to conduct thorough analysis and risk assessment to ensure the success of a capital budget proposal.

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Jimmy Khan has developed a trading rule where he buys firms with relatively high dividend yields. This trading rule has consistently earned a risk-adjusted return of 15% per month for the past 10 years. This is evidence of:
a) semi-strong form efficiency
b) weak-form inefficiency
c) weak-form efficiency
d) semi-strong form inefficiency

Answers

In this case, Khan's trading rule is evidence of weak-form efficiency. Khan has been consistently earning a risk-adjusted return of 15% per month for the past 10 years.

Here, correct option is C.

This suggests that Khan is taking advantage of some kind of pattern or trend in the stock market that is not available to the general public. This indicates that the security prices are not accurately reflecting all publicly available information, suggesting weak-form efficiency.

Semi-strong form efficiency is a market efficiency which suggests that all publicly available information is accurately reflected in a security's price. In other words, all publicly available information about a security is already built into its price. Weak-form efficiency, on the other hand, suggests that past stock prices or historical data cannot be used to predict future stock prices.

Therefore, correct option is C.

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boards of directors have responded to financial crises, corporate scandals, regulator obligations, and investor requests for structural changes. in the 2011 harvard business review study of the changes in configuration of boards since 1987, which change has been brought about by government legislation? group of answer choices percentage of boards that have an average age of 64 or older has increased. average pay for directors has increased. percentage of boards with 12 or fewer members has increased. percentage of the directors that are independent has increased.

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According to the 2011 Harvard Business Review study, the change in configuration of boards that has been brought about by government legislation is the increase in the percentage of directors that are independent.

What's the change in configuration of boards

The change was likely a response to financial crises and corporate scandals, as regulators and investors called for greater transparency and accountability in corporate governance.

Independent directors are those who do not have any affiliations or relationships with the company or its executives, and are therefore more likely to provide unbiased oversight and hold management accountable.

The increase in independent directors on boards is a positive development for corporate governance, as it helps to ensure that boards are able to effectively oversee the company's strategy, risk management, and financial performance.

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Fred invests 1200 at a nominal rate of 4.8% compounded monthly. After one year, his balance is X. Jane invests 1200 at a nominal rate of 4.8% compounded annually. After one year, her balance is Y. Sam invests 1200 at a continuous force of interest of 4.8%. After one year, his balance is Z. Which of the following is true?
a. X < Y < Z
b. Z < X < Y
c. Z < Y < X
d. Y < X < Z
e. Y < Z < X

Answers

Compound interest is the interest earned on both the principal amount and any previously accumulated interest on a sum of money.

The correct answer is option e. Y < Z < X. The formula for compound interest is:A = P(1 + r/n)^(nt)
Where:
A = final amount
P = principal amount
r = nominal annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = time (in years)

For Fred:
P = $1200
r = 4.8% = 0.048
n = 12 (monthly compounding)
t = 1

Using the formula, we get:
X = 1200(1 + 0.048/12)^(12*1)
X = $1270.06

For Jane:
P = $1200
r = 4.8% = 0.048
n = 1 (annual compounding)
t = 1

Using the formula, we get:
Y = 1200(1 + 0.048/1)^(1*1)
Y = $1257.60

For Sam:
P = $1200
r = 4.8% = 0.048
n = continuous compounding
t = 1

Using the formula, we get:
Z = 1200e^(0.048*1)
Z = $1258.96

Therefore, the order of balances from lowest to highest is:
Y < Z < X

So the correct answer is option e. Y < Z < X.

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a/an __________ are motivated by a desire to acquire something, for example food riots. (35)

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An acquisitive mob is motivated by a desire to acquire something that is perceived as scarce or in short supply.

These mobs can form when individuals or groups feel that their access to basic necessities such as food, water, or shelter is being threatened or limited. Food riots, for example, are a common type of acquisitive mob that typically occurs in response to food shortages or rising prices. During such riots, people may take to the streets and engage in looting or other forms of violence to secure food or other essential items.

Acquisitive mobs can also form in response to perceived social or economic inequalities. In these cases, individuals may feel that they are being unfairly denied access to resources or opportunities, and may resort to violent or disruptive behavior to express their grievances. Acquisitive mobs can be difficult to control and can pose a significant threat to public safety and social stability.

Effective responses to such mobs require a combination of short-term measures, such as police intervention, and longer-term efforts to address underlying social and economic factors that contribute to mob formation.

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A/an incentive is motivated by a desire to acquire something, for example, food riots.

A motivator or catalyst is something that urges someone to act. Due to a lack of resources, people are driven to buy food in the case of food riots, which gives them the incentive to take action through protests or riots. Positive or negative incentives are possible, as well as financial or non-financial ones. They may also be explicit or implicit, direct or indirect, etc. In economics, incentives are essential in determining how people, businesses, and governments behave. Designing efficient institutions and policies that advance social welfare and economic prosperity requires a thorough understanding of incentives and how they operate.

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if quanity supplies equals 85 units and the quanity demanded equals 80 units under a price contol then it is a

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It is a situation of excess supply, also known as a surplus. In the given scenario, the quantity supplied exceeds the quantity demanded, indicating a surplus in the market.

Surplus or excess supply refers to a situation where the quantity supplied of a good or service exceeds the quantity demanded at a given price. This can occur when there is a price control in place, such as a price ceiling or price floor, or in a free market without any price controls.

In this case, the quantity supplied exceeds the quantity demanded, resulting in an excess of goods in the market. Price controls, such as price ceilings or price floors, are government-imposed policies that can distort the equilibrium price and quantity in a market, leading to imbalances between supply and demand.

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A retailer received a written firm offer signed by a supplier. The offer committed the supplier to providing the retailer with up to 10,000 tubes of toothpaste over the next 45 days at $1 a tube. Thirty days later, the supplier informed the retailer that the price per tube of toothpaste would be $1.10. The next day the retailer ordered 6,000 tubes of toothpaste from the supplier, which the supplier promptly shipped. Sixty days after the receipt of the offer, the retailer ordered another 4,000 tubes of toothpaste, which the supplier also promptly shipped.
What price is the supplier permitted to charge the retailer for the toothpaste?

Answers

The supplier is permitted to charge the retailer $1 per tube of toothpaste for all 10,000 tubes that were ordered by the retailer within the 45-day time frame of the original offer.

The supplier is permitted to charge the retailer $1 per tube of toothpaste for the first 10,000 tubes. This is because the offer committed the supplier to providing the retailer with up to 10,000 tubes of toothpaste over the next 45 days at $1 a tube, and the retailer ordered a total of 10,000 tubes within that time frame.

However, the supplier is not permitted to charge the retailer $1.10 per tube of toothpaste, as they informed the retailer of this price increase after the retailer had already placed an order for 6,000 tubes at the original price of $1 per tube. Therefore, the supplier must honor the original price of $1 per tube for the remaining 4,000 tubes that the retailer ordered.

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the opportunity cost of a purchase is: a. always equal to the selling price of what you purchased. b. the lowest possible price. c. the alternative good or service that one sacrifices because a different good was purchased. d. zero if the item is what you want most. e. always greater for people who are out of work than for people who are working.

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The opportunity cost of a purchase is: c. the alternative good or service that one sacrifices because a different good was purchased. This term represents the value of the best alternative option that was not chosen when making a decision.

The opportunity cost of a purchase is the alternative good or service that one sacrifices because a different good was purchased. It is the value of the best alternative foregone. It is important to consider opportunity cost when making a decision as it helps to weigh the benefits and drawbacks of different options. It is not always equal to the selling price of what you purchased, the lowest possible price, zero if the item is what you want most, or always greater for people who are out of work than for people who are working.

Option c is correct.

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distinguish between common-law liability and statutory liability for auditors. what is the basis for the difference in liability?

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A Liability is defined as a unborn loss of profitable benefits that an reality is needed to give to another reality as a result of once deals or other once events.

Common law liability arises from the legal opinions of judges in deciding a case, a precedent that serves as a companion for other judges to decide future analogous cases and is used in civil action.

On the other hand, legal liability reflects laws legislated at the state or civil position and prescribes certain procedures.

May involve civil or felonious liability. Liability is an obligation or liability to another that's extinguished by the unborn transfer or use of goods, the provision of services or any other profitable sale at a specific or determinable time, upon the circumstance of a specific event or on demand.

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An annuity owner calls you, the agent, to request a surrender of an annuity, which was held for less than one year. When you apprise the owner of the surrender charges and potential losses, the owner indicates that the fees and losses do not matter and to please make the surrender immediately and wire the money to an account located in Europe. What should the agent do?

Answers

The agent should call the Company compliance officer and await instructions.

Compliance Officers are chargeable for making sure that every one company strategies and processes follow the law. And now no longer simplest the law — a Compliance Officer is likewise chargeable for making sure that agency operations follow inner requirements too. A compliance officer is an character who guarantees that a agency complies with its outdoor regulatory and prison necessities in addition to inner rules and bylaws. Compliance officials have a obligation to their agency to paintings with control and group of workers to perceive and manipulate regulatory risk.

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As an agent, it is important to act in the best interest of the annuity owner and provide them with all necessary information to make an informed decision. However, if the owner insists on proceeding with the surrender, the agent must comply with their request while taking necessary precautions to ensure that the transaction is legitimate and not being used for illegal purposes.

As an agent, the first thing that should be done is to verify the identity of the annuity owner and make sure that the request is legitimate. If the request is legitimate, it is important to inform the annuity owner about the potential losses and surrender charges associated with the annuity surrender. However, if the annuity owner insists on proceeding with the surrender, the agent must comply with their request.In this scenario, it is concerning that the annuity owner wants the money wired to an account in Europe.

This raises red flags and may indicate that the annuity owner is involved in fraudulent activities or trying to evade taxes. The agent must exercise caution and follow proper protocols when wiring the money to ensure that it is not being used for illegal purposes.Furthermore, since the annuity was held for less than one year, it is important to inform the annuity owner about the potential tax implications of the surrender. The owner may face early withdrawal penalties and be subject to income taxes on the gains earned from the annuity.

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Q4 - A family has established a trust fund for its children, attending college, and has paid $101.514 to a bank. In return, the bak is going to pay the family $20,000 every year for the next 6 years. The first payment will be made 1 year from the day the family paid the bank. What is the interest rate that thic trust fund will be earning?

Answers

The trust fund is earning an interest rate of 5%.

Calculate the the interest rate earned by the trust fund?

To solve for the interest rate earned by the trust fund, we can use the present value formula:

PV = PMT x (1 - 1/(1+r)^n) / r

Where PV is the present value of the payments, PMT is the payment amount, r is the interest rate, and n is the number of payment periods.

In this case, we know that the family paid $101,514 upfront and will receive $20,000 per year for 6 years, with the first payment made 1 year after the initial payment. Therefore, PMT = $20,000, n = 6, and the time period is 5 years.

We can rearrange the formula to solve for r:

r = (PMT / ((PV x r) + PMT)) x (1 - 1/(1+r)^n)

We can start by assuming an interest rate and then use the formula to calculate the present value of the payments. We can then compare this value to the initial payment of $101,514 to see if the assumed interest rate is too high or too low.

Let's assume an interest rate of 4%. Plugging in the values, we get:

PV = $20,000 x (1 - 1/(1+0.04)^6) / 0.04 = $98,619.56

Since $98,619.56 is less than the initial payment of $101,514, we know that the interest rate must be higher than 4%. Let's try an interest rate of 5%:

PV = $20,000 x (1 - 1/(1+0.05)^6) / 0.05 = $101,150.70

Since $101,150.70 is very close to the initial payment of $101,514, we know that the interest rate is approximately 5%. Therefore, the trust fund is earning an interest rate of 5%.

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Mr. and Mrs. Norton purchased a ski-chalet for $34,500. (This must have been in 1930!) They paid $3,860 down and agreed to make equal payments at the end of every three months for 15 years. Interest is 7.43% compounded quarterly. Do not include the dollar sign, $, in your answers. Do not include the comma usually used to denote thousands. All dollar figures must be exactly 2 decimals. Although the Cash Flow Concept puts a negative sign, "-", in front of many numbers, do not include the negative sign when you put these numbers into Moodle. (a.) What is the size of the payment? Hint: Make sure your calculator is set to 2 decimal places before using AMORT. (b.) What is the balance after the first payment? (C.) How much of the principal is paid in the first payment? (d.) How much interest is paid in the first payment? (e.) What is the balance after the second payment? (f.) How much of the principal is paid in the second payment? (9.) How much interest is paid in the second payment? (h.) How much will they have paid in total after the 15 years? Total paid in payment = Plus the downpayment = (1.) How much interest will they pay in total? Total paid in payments - Original Mortgage =

Answers

(a) Using the PMT function in Excel, with a loan amount of $30,640 ($34,500 - $3,860) and a 15-year term with quarterly payments at 7.43% quarterly interest rate, the size of the payment is $552.23.

(b) After the first payment, the balance is the present value of the remaining payments, which can be calculated using the PV function in Excel. With a rate of 7.43%/4, 14*4 = 56 periods remaining, and a payment of $552.23, the balance is $29,428.05.

(c) The amount of principal paid in the first payment can be calculated by subtracting the interest paid from the total payment. The interest paid can be calculated as the balance multiplied by the quarterly interest rate of 7.43%/4. Therefore, the principal paid is $552.23 - ($29,428.05 x 7.43%/4) = $159.16.

(d) The interest paid in the first payment is $552.23 - $159.16 = $393.07.

(e) After the second payment, the remaining balance is the present value of the remaining payments, which can be calculated using the PV function in Excel. With a rate of 7.43%/4, 13*4 = 52 periods remaining, and a payment of $552.23, the balance is $28,198.54.

(f) The amount of principal paid in the second payment can be calculated by subtracting the interest paid from the total payment. The interest paid can be calculated as the balance multiplied by the quarterly interest rate of 7.43%/4. Therefore, the principal paid is $552.23 - ($28,198.54 x 7.43%/4) = $163.79.

(g) The interest paid in the second payment is $552.23 - $163.79 = $388.44.

(h) The total amount paid after 15 years can be calculated as the total number of payments (154) multiplied by the payment amount, plus the down payment of $3,860. Therefore, the total paid is (154)*$552.23 + $3,860 = $105,791.40.

(i) The total interest paid can be calculated as the total amount paid minus the original mortgage amount of $30,640. Therefore, the total interest paid is $105,791.40 - $30,640 = $75,151.40.

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the cost of a firm’s internal common equity is generally higher than the costs of a firm’s external common equity due to issuance costs. (True or False)

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True. The cost of a firm's internal common equity is generally higher than the cost of a firm's external common equity due to the issuance costs associated with internal equity, such as the costs of stock option plans, stock purchase plans, and other incentives.

External equity, on the other hand, involves fewer issuance costs since it is generally acquired through public offerings or private placements. The statement is generally true. The cost of a firm's internal common equity, which is the return required by the firm's shareholders on the equity they have invested in the company, is generally higher than the cost of external common equity, which is the return required by new investors in the company's stock. This is because the cost of internal common equity includes not only the cost of the equity capital itself, but also the opportunity cost of retaining earnings rather than distributing them as dividends to shareholders. Additionally, internal common equity may be subject to higher taxes than external equity, further increasing the cost of internal equity financing. On the other hand, external common equity may be subject to issuance costs such as underwriting fees, legal and accounting expenses, and listing fees. However, the magnitude of these costs may vary depending on the size and type of the company and the nature of the external financing used.

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You just won the grand prize in a national writing contest! As your prize, you will receive $2,000 a month for ten years. If you can earn 7 percent on your money, what is this prize worth to you today?
A. $172,252.71
B. $178,411.06
C. $181,338.40
D. $185,333.33
E. $190,450.25

Answers

The value of the prize is worth $185,333.33 today. This is because the prize is $2,000 a month for ten years, so it totals $240,000.

When that amount is adjusted for the 7 percent interest rate, it comes to $185,333.33. This amount is calculated by taking the original amount and multiplying it by the present value of an annuity factor.

The factor takes into account the time value of money, which means that money today is worth more than money in the future due to the potential for it to earn interest over time. Therefore, the prize of $240,000 a decade from now is worth less than $240,000 today, when factoring in the 7 percent interest rate.

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jill smithers, operations manager, takes measurements at various points in the transformation process of producing her company's organic baby food products. this is also known as

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Jill Smithers is using a process known as process monitoring or process control to gather data and ensure quality control throughout the transformation process of producing her company's organic baby food products.

As the operations manager, it is her responsibility to measure and analyze various points in the process to identify areas for improvement and ensure that the end product meets the company's standards.Jill Smithers, as the Operations Manager, is performing a process known as "process monitoring" or "quality control" in the transformation process of producing her company's organic baby food products. This involves taking measurements at various points to ensure that the products meet the required standards and specifications.

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1. a)
Rozanski Co. currently has EBIT of $36,000 and is all equity financed. EBIT are expected to grow at a rate of 3% per year. The firm pays corporate taxes equal to 26% of taxable income. The cost of equity for this firm is 10%.
What is the market value of the firm? Enter your answer rounded to two decimal places.
b)
Rozanski Co. currently has EBIT of $31,000 and is all equity financed. EBIT are expected to grow at a rate of 1% per year. The firm pays corporate taxes equal to 22% of taxable income. The cost of equity for this firm is 16%.
What is the market value of the firm? Enter your answer rounded to two decimal places.

Answers

The market values for the two scenarios are:
a) $266,400.00
b) $151,125.00

a) To calculate the market value of the firm, we can use the formula:

Market Value = EBIT x (1 - Tax Rate) / Cost of Equity

For Rozanski Co. in scenario a), we have:
EBIT = $36,000
Tax Rate = 26%
Cost of Equity = 10%

Market Value = $36,000 x (1 - 0.26) / 0.10
Market Value = $36,000 x 0.74 / 0.10
Market Value = $26,640 / 0.10
Market Value = $266,400.00

b) For Rozanski Co. in scenario b), we have:
EBIT = $31,000
Tax Rate = 22%
Cost of Equity = 16%

Market Value = $31,000 x (1 - 0.22) / 0.16
Market Value = $31,000 x 0.78 / 0.16
Market Value = $24,180 / 0.16
Market Value = $151,125.00

So, the market values for the two scenarios are:
a) $266,400.00
b) $151,125.00

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the seller of personal watercraft put an ad for sale in the paper. a customer saw the ad and told her that he wanted to buy the watercraft but had to arrange for financing. the seller suggested that they write a contract for sale then and there so that they would not have to waste any time while he got his financing. in the meantime, the parties also orally agreed to a financing contract, under which the seller would make a loan at 1% interest, which the buyer would pay off in installments and use the money to buy the boat. the next day, when the buyer came to pick up the boat, the seller had changed their mind about the financing contract and refused to provide the loan, but insisted that the buyer still had to pay for the boat. the buyer refused stating that he could not buy the boat without financing. the seller sues the buyer for breach. the buyer seeks to defend himself by arguing that his failure to buy the boat was due to the sellers own breach by refusing to provide the financing loan. can the buyer introduce evidence of the financing contract to explain his breach?

Answers

Yes, the buyer can introduce evidence of the oral financing contract to explain his breach.

How can the buyers introduce evidence of the financing contract

The buyer's defense is based on the seller's breach of their oral agreement, which was to provide a loan at 1% interest, payable in installments.

By refusing to provide the loan, the seller failed to fulfill their part of the agreement, thus causing the buyer's inability to purchase the watercraft.

Introducing evidence of this oral financing contract can help the buyer establish that their breach was a result of the seller's own breach, potentially relieving them of liability for not purchasing the watercraft.

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Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 28% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 6%.
Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as follows:
WBills Windex Expected Return Variance 0.6 0.4 0.092 0.0125 Example
0.8 0.2 0.4 0.6 1 0 0 1 0.2 0.8

Answers

Using the given historical data and weights, the expected return and variance of the T-bills and S&P 500 index portfolios are:

Expected return: 9.2% for the 0.6 T-bill/0.4 S&P 500 portfolio and 8.4% for the 0.8 T-bill/0.2 S&P 500 portfolio.

Variance: 1.25% for the 0.6 T-bill/0.4 S&P 500 portfolio and 0.36% for the 0.8 T-bill/0.2 S&P 500 portfolio.

To calculate the expected return of each portfolio, we multiply the weight of each asset (T-bills and S&P 500) by its expected return and sum the results. For example, the expected return of the 0.6 T-bill/0.4 S&P 500 portfolio is:

(0.6 x 6%) + (0.4 x (6% + 8%)) = 9.2%

To calculate the variance of each portfolio, we use the formula:

Variance = (w1^2 x σ1^2) + (w2^2 x σ2^2) + 2(w1 x w2 x σ1 x σ2 x ρ)

where w1 and w2 are the weights of the two assets, σ1 and σ2 are their standard deviations, and ρ is the correlation between them (which we assume to be 0 since they are uncorrelated). For example, the variance of the 0.6 T-bill/0.4 S&P 500 portfolio is:

(0.6^2 x 0) + (0.4^2 x 0.28^2) = 0.0125 or 1.25%

The variance of the 0.8 T-bill/0.2 S&P 500 portfolio is:

(0.8^2 x 0) + (0.2^2 x 0.28^2) = 0.0036 or 0.36%

These calculations can help investors make informed decisions about how to allocate their assets between T-bills and the S&P 500 index.

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You are given information for a delta-hedged portfolio for European options that you have written. For each scenario, compute the number of shares to buy or sell (indicate which action to take) on day 1 to maintain the delta-hedge for a portfolio of one option.
Stock Price Call premium Call delta (A)
Day 0 55 6.50 0.4
Day 1 60 9.50 0.6
Stock Price Put premium Put Elasticity()
Day 0 50 1.00 -5
Day 1 49 0.91 -7

Answers

To maintain the delta-hedge for a portfolio of one European call option, you should buy 0.6 shares on Day 1.


The call delta on Day 0 is 0.4, and on Day 1 it's 0.6. The change in delta (∆delta) is 0.6 - 0.4 = 0.2. Since you have written one option, you need to buy 1 × 0.2 = 0.2 shares to maintain the delta-hedge.

However, since the question asks for maintaining the hedge for a portfolio of one option, it means you need to consider the initial 0.4 delta as well. Thus, you should buy 0.4 + 0.2 = 0.6 shares on Day 1.

To maintain the delta-hedge for a portfolio of one European put option, you should sell 7 shares on Day 1.


The put elasticity on Day 0 is -5, and on Day 1 it's -7. The change in elasticity (∆elasticity) is -7 - (-5) = -2. Since you have written one option, you need to sell 1 × 2 = 2 shares to maintain the delta-hedge.

However, since the question asks for maintaining the hedge for a portfolio of one option, it means you need to consider the initial -5 elasticity as well. Thus, you should sell -5 + (-2) = -7 shares on Day 1.

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You purchased a stock for $175 and sold it for $250 one yearlater. Additionally, you received a dividend payment of $30. Whatwas your total return (yield) on this investment?

Answers

The total return (yield) on an investment which involve purchasing a stock for $175 and selling it for $250 as well as a dividend payment of $30 is 60%.

To calculate the total return (yield) on your investment, we will consider the initial stock purchase price, the selling price, and the dividend payment.

In order to calculate the total return, follow these steps:

1. Calculate the capital gain:

Selling price - Purchase price = $250 - $175 = $75.

2. Add the dividend payment:

Capital gain + Dividend = $75 + $30 = $105.

3. Calculate the total return (yield):

(Total gain / Purchase price) x 100 = ($105 / $175) x 100 = 60%.

So, your total return (yield) on this investment was 60%.

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the arrival rate at a parking lot is 6 veh/min. vehicles start arriving at 6:00 p.m., and when the queue reaches 36 vehicles, service begins. if company policy is that total vehicle delay should be equal to 500 veh-min, what is the departure rate?

Answers

The departure rate in context to the given question is 6.75 veh/min.

the arrival rate is already given in the question, now we need to find the departure rate

Given,

Arrival rate = 6 veh/min

Total vehicle delay = 5000 veh/min

therefore, we need to implement the formula

Total vehicle delay =  total number of vehicles in the line x time spend in the line

adding the  given values in the given formula

restructuring the formula concerning the departure rate

500 = 36x (1/departure rate - 1/ arrival rate)

500/36 = 1/departure rate - 1/6

departure rate = 36/500 - 1/6

departure rate = 6.75 veh/min

The departure rate in context to the given question is 6.75 veh/min.

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A portfolio consists of the following two investments:
a bond with face value of $100.00 paying annual coupons of 9% maturing in 5 years
an annuity with payments of $40.00 at the end of each year for 5 years
The portfolio is comprised of 46% bonds and 54% annuities.
The term structure is flat and the current yield is 12% pa effective.
Calculate the duration (D) of the portfolio. Give your answer to 2 decimal places.
D = ______ years

Answers

The duration of the portfolio is 3.57 years.

To calculate the duration of the portfolio, we can use the following formula:

D = w1D1 + w2D2

where w1 and w2 are the weights of the bond and annuity in the portfolio, and D1 and D2 are the durations of the bond and annuity, respectively.

First, let's calculate the duration of the bond. Since the term structure is flat, the yield to maturity is equal to the current yield of 12%. Using the formula for the duration of a bond, we get:

D1 = (1 + y) * [ (1 - (1 + y)) / y ] - n * [ (1 + y) ]

where y is the annual yield to maturity, n is the number of years to maturity, and D1 is the duration of the bond.

Plugging in the values, we get:

D1 = (1 + 0.12) * [ (1 - (1 + 0.12) / 0.12 ] - 5 * [ (1 + 0.12) ]

= 3.87 years (rounded to 2 decimal places)

Next, let's calculate the duration of the annuity. Since the payments are made at the end of each year, we can use the formula for the duration of an annuity due and subtract 1 to get the duration of the annuity:

D2 = [ (1 + r) * (1 - (1 + r)) / r ] - 1

where r is the discount rate, n is the number of years, and D2 is the duration of the annuity.

Plugging in the values, we get:

D2 = [ (1 + 0.12) * (1 - (1 + 0.12)^(-5)) / 0.12 ] - 1

= 3.37 years (rounded to 2 decimal places)

Finally, we can calculate the duration of the portfolio by weighting the durations of the bond and annuity by their respective weights:

D = 0.46 * 3.87 + 0.54 * 3.37

= 3.57 years (rounded to 2 decimal places)

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carol fisher wants to sell the stock of hathaway international at the next available price after the prices reaches $50 per share. what type of transaction is carol making?

Answers

Carol Fisher is making a sell limit order  transaction for the stock of Hathaway International once the price reaches $50 per share.

A sell limit order is a type of order to sell a security at a specified or better price, meaning that the order will only be executed if the stock reaches a particular price or higher.

Sell limit orders are a common way for investors to set a target price for selling their stocks. This type of order allows investors to control the price at which they sell their shares, ensuring that they receive a minimum price for their investment.

Once the stock price reaches the specified price or higher, the broker will execute the order and sell the stock at the next available price.Carol Fisher is making a "stop order" or "stop-loss order" transaction.

In this case, she wants to sell her Hathaway International stock when the price reaches $50 per share. A stop order is an instruction to sell the stock at the next available price after it reaches the specified price threshold, which helps protect profits or limit losses.

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in how many ways can seven different jobs be assigned to four different employees so that each employee is as- signed at least one job and the most difficult job is as- signed to the best employee?

Answers

There are 540 ways to assign the seven different jobs to four different employees, ensuring each employee gets at least one job and the most difficult job is assigned to the best employee.

To find the number of ways seven different jobs can be assigned to four different employees, ensuring that each employee gets at least one job and the most difficult job is assigned to the best employee, we can use combinatorics.

First, let's assign the most difficult job to the best employee, which leaves six jobs for the other three employees. Since each employee must be assigned at least one job, we can use the Principle of Inclusion-Exclusion to find the number of ways to distribute the remaining six jobs.

There are [tex]3^{6}[/tex] ways to distribute the six jobs among the three employees without restrictions. However, this includes cases where one or more employees do not receive any jobs. To correct for this, we need to subtract the number of ways in which one or more employees do not get any jobs.

There are 3 ways to exclude one employee and [tex]2^{6}[/tex] ways to distribute the jobs among the remaining two employees. We've counted cases where two employees are excluded twice, so we need to add back the number of ways all six jobs are assigned to one employee (3 ways).

Using the Principle of Inclusion-Exclusion, the number of ways to distribute the remaining six jobs to the three employees is:

[tex]3^{6} -3*(2^{6} )+3[/tex] =

729 - 192 + 3 = 540

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