Answer:
(a) What is the yield to maturity (annual compounding) on the bond?
Yield to maturity (YTM) = (face value / market price)¹/ⁿ - 1
YTM = ($1,000 / $800)⁰°² - 1 = 0.0456 or 4.56%
(b) Assume the yield to maturity on comparable zeros increases to 7% immediately after purchasing the bond and remains there. Calculate your annual return (holding period yield) if you sell the bond after one year.
holding period yield = (end of period value - initial value) / initial value
initial value = $800
end of period value = ?
to determine the end of period value we must solve:
7% = ($1,000 / ?)⁰°²⁵ - 1
1.07 = ($1,000 / ?)⁰°²⁵
1.07⁴ = $1,000 / ?
? = $1,000 / 1.3108 = $762.90
holding period yield = ($762.90 - $800) / $800 = -4.64%
(c) Assume yields to maturity on comparable bonds remain at 7%, calculate your annual return if you sell the bond after two years.
1.07³ = $1,000 / ?
? = $1,000 / 1.225 = $816.30
holding period yield = ($816.30 - $800) / $800 = 2.04%
annualized return = (1 + total return)¹/ⁿ - 1 = (1 + 0.0204)¹/² - 1 = 1.01%
(d) Suppose after 3 years, the yield to maturity on similar zeros declines to 3%. Calculate the annual return if you sell the bond at that time.
1.03² = $1,000 / ?
? = $1,000 / 1.0609 = $942.60
holding period yield = ($942.60 - $800) / $800 = 17.83%
annualized return = (1 + total return)¹/ⁿ - 1 = (1 + 0.1783)¹/³ - 1 = 5.62%
This business related question deals with the calculation and understanding of yield to maturity and holding period yield related to a zero-coupon Treasury bond. The yield to maturity is the estimated total return if a bond is held until it matures. The holding period yield is dependent on the current market conditions and may alter if the bond is sold before it reaches its maturity.
To answer these questions, you first need to understand key concepts related to bonds. A zero-coupon bond is a bond that doesn't give regular interest payments to the investor. Instead, the investor purchases the bond for a price lower than its face value, then receives the face value when the bond reaches maturity. The difference represents the investor's profit.
Let's handle each sub-question in the context of a five-year zero-coupon Treasury bond that you bought for $800 but has a face value of $1000:
a) The yield to maturity (YTM) is the total return anticipated on a bond if it is held until it matures. Yield to maturity is expressed annually as a percentage. In this case, the equation to solve for yield to maturity is: $1,000 = $800*(1+YTM)^5. Normally, it's impossible to directly solve this equation for YTM (without using calculators or software with financial functions), making it a more complex business topic.
b & c) The holding period yield is different than the yield to maturity and takes into account the current market conditions. In this scenario, if interest rates were to rise to 7%, the bond's value would decrease, impacting your returns if you decided to sell before maturity.
d) The same concept applies if yield to maturity changes after 3 years or at any other time before maturity. An alteration in the market interest rates would affect the price at which you could sell your bond, hence influencing your annual return.
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Instructions
a. Prepare the entry to record the factory labor costs for the month of January.
b. Prepare the entry to assign factory labor to production.
(Weygandt, 12/2017, p. 20-31) Weygandt, J. J., Kimmel, P. D., Kieso, D. E. (2017). Accounting Principles, 13th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119411017 Always check citation for accuracy before use.
Answer:
a. Date Account Titles and Explanation Debit Credit
Factory labor $90,000
Factory wages payable $76,000
Employer payroll taxes payable $8,000
Employer fringe benefits payable $6,000
b. The entry to assign factory labor to production is the following
Date Account Titles and Explanation Debit Credit
Work in process inventory $76,500
(85% of $90,000)
Manufacturing overhead $13,500
(15% of $90,000)
Factory labor $90,000
Answer:
80
Explanation:
According to the given situation, the computation of n is shown below:-
EXP[27.72δ]=2
δ =0.025
m = 1 ÷ 2
(1 + 0.025 ÷ (1 ÷ 2))^n ÷ 2 = 7.04
n ÷ 2 × ln(1.05)=ln(7.04)
n ÷ 2=40
n = 80
Therefore for computing the n we simply applied the above formula i.e. by considering all the information given in the question
Hence,the n is 80
To find the number of years it takes for an investment of $1 to increase to $7.04 at a nominal rate of interest numerically equal to δ and convertible once every two years, we can use the formula A = P(1 + r/m)^mt. Using this formula, we can solve for t by substituting the given values into the equation and solving for t using logarithms.
To find n, the number of years it takes for an investment of $1 to increase to $7.04 at a nominal rate of interest numerically equal to δ and convertible once every two years, we can use the formula:
A = P(1 + r/m)mt
Where A is the final amount, P is the initial investment, r is the nominal rate of interest, m is the number of times interest is compounded per year, and t is the number of years.
In this case, A = $7.04, P = $1, r = δ, and m = 2 (since it is convertible once every two years). Using this information, we can solve for t:
$7.04 = $1(1 + δ/2)2t
Divide both sides by $1:
7.04 = (1 + δ/2)2t
Take the logarithm of both sides:
log(7.04) = log((1 + δ/2)2t)
Apply the power rule of logarithms:
log(7.04) = 2t * log(1 + δ/2)
Divide both sides by 2 * log(1 + δ/2):
t = log(7.04) / (2 * log(1 + δ/2))
Plug in the value of δ to find the value of t.
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#SPJ3
Answer:
Selling price = $4.75
Variable costs= $2.00
Contribution margin ratio = contribution margin / sale
= ($4.75 - $2.00) / $4.75 = 57.8%
Break even sale in dollars = fixed costs / contribution margin ratio
= $1100 / 57.8% = $1903
Breakeven Sales = $1903
Explanation:
Answer:
Shoe-leather Costs.
Explanation:
In Business management, Shoe-leather costs can be defined as the costs of time and effort people take to counteract the effect of high inflation on the depreciative purchasing power of money by visiting banks or other financial institutions regularly in order to limit inflation tax they pay on holding cash.
Metaphorically speaking, in a bid to protect the value of money or assets, people wear out the sole of their shoes by going to the bank regularly.
Hence, Shen is practicing a shoe-leather cost.
Answer:
Amount of interest = $ 300
Explanation:
Given:
Total number of month = 3 months (Oct, Nov and Dec)
Amount borrow = $20,000
Interest rate = 6%
Find:
Amount of interest
Computation:
Amount of interest = $20,000 x 6% x 3 months / 12 months
Amount of interest = $ 300
b.18.25%
c. 15.05%
d. 13.33%
Answer:
a. 20.00%
Explanation:
Monthly loan payment
= (685000*10%*8/12 + 685000)/8
= $91,333.33
PV = -685000
Nper = 8
Using RATE function
= RATE(8,91333.33,-685000,0)*12
= 20%
Therefore, The loan's annual percentage rate (APR) is 20%.