Assume that a $1,000,000 par value, semiannual coupon US Treasury note with three years to maturity has a coupon rate of 3%. The
yield to maturity (YTM) of the bond is 11.00%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note: a. $504,112.64 b. $680,151.97 c. $800,178.79 d. $960,214.55
1 answer:
Answer:
c. $800,178.79
Explanation:
In this question we use the Present value formula that is shown on the attachment below:
Given that
Future value = $1,000,000
PMT = 1,000,000 × 3% ÷ 2 = $15,000
NPER = 3 years × 2 = 6 years
Rate of interest = 11% ÷ 2 = 5.5%
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value would be $800,178.79
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Answer:
The firm needs to sale for 5,708 units to break even finnancially.
Explanation:
<u>We convert the fixed asset investment into an annuity:</u>
PV 148,000
time 3
rate 0.15
C $ 64,820.590
Now, the amount above the annual fixed cost of 39,800 will be considered a gain for tax purposes, we need to increase it by 21% o give the sales before taxes.
before taxes target contribution:
64,820.59 / 1.20 = 54,017.16
We also have a depreciation component which generates a tax shield:
(148,000 / 3) x 21% = (10,360)
<em>Now, we solve for the break even point of the sum of this components:</em>
39,800 + 54,017.16 - 10,360= 83,457.16 dollars
Each units generates 14.62 dollars we divide and obtain the sales per year in untis:
83,457.16 / 14.62 = 5.708,42