Leon is the owner of a corner store. Which ratio should he compute if he wants to know how long the store can pay its bills give
1 answer:
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Answer:
13.37% ; 7.01%
Explanation:
The computation of the stated and expected yields to maturity of the bonds is shown in the attachment below:
For stated yield, we use the RATE formula i.e
Given that,
Present value = $920
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 12% = $120
NPER = 12 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this, the stated yield is 13.37%
Now for expected yield, we also use the RATE formula i.e
Given that,
Present value = $920
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 12% ÷ 2 = $60
NPER = 12 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this, the expected yield is 7.01%
