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Annette [7]
2 years ago
9

You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $1,044. These bonds make annual paym

ents and mature 13 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 6 percent. The bonds have a par value of $1,000.Required:If the inflation rate was 3.4 percent over the past year, what was your total real return on investment?
Business
1 answer:
GalinKa [24]2 years ago
4 0

Answer:

17.4%

Explanation:

original purchase price 1 year ago = $1,044

current market price:

0.06 = {80 + [(1,000 - MV)/13]} /  [(1,000 + MV)/2]

0.06 x [(1,000 + MV)/2] = 80 + [(1,000 - MV)/13]

0.06 x (500 + 0.5MV) = 80 + 76.92 - 0.0769MV

30 + 0.03MV = 156.92 - 0.0769MV

0.1069MV = 126.92

MV = 126.92 / 0.1069 = $1,187.28

total returns during the year = $80 (coupon) + ($1,187.28 - $1,044) = $223.28

nominal return on investment = $223.28 / $1,044 = 21.387%

real return on investment = [(1 + i) / (1 + inflation)] - 1 = [(1 + 0.21387) / (1 + 0.034)] - 1 = 1.174 - 1 = 0.174 = 17.4%

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An investor buys a property for $608,000 with a 25-year mortgage and monthly payments at 8.10% APR. After 18 months the investor
vesna_86 [32]

Answer:

$71,520

Explanation:

we must first determine the monthly payment:

monthly payment = present value / annuity factor

  • present value = $608,000
  • PV annuity factor, 0.675%, 300 periods = 128.46

monthly payment = $608,000 / 128.46 = $4,732.99

Then I prepared an amortization schedule using an excel spreadsheet. After the 18th payment, the principal balance is $596,005.

The investor will have $667,525 - $596,005 = $71,520

Download pdf
6 0
2 years ago
You expect KT industries (KTI) will have earnings per share of $4 this year and expect that they will pay out $1.75 of these ear
melisa1 [442]

The value of a share of KTI's stock today is closest to 9.5% , 0.004375 .

Explanation:

Investment Investment (ROI) is an investment performance metric used to evaluate or compare the success of a variety of investment operations.

In addition to the spending price, ROI aims to explicitly calculate the make value of a single project.

g = retention rate

ROI = 0.75*13% = 9.5%,

Price = 1.75/(0.10-0.0975) = 0.004375

5 0
2 years ago
Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remainin
Gekata [30.6K]

Answer:

$0.70 and 3.3

Explanation:

Data provided in the question

Household spending for each additional dollar = $0.70

And, the remaining amount = $0.30

So in the given case,

The marginal propensity to consume (MPC) = household spending for each additional dollar i.e $0.70

And, the Spending multiplier is

= 1 ÷ 1 - MPC

= 1 ÷ 1 - $0.70

= 1 ÷ $0.30

= 3.3

5 0
2 years ago
(look at the graph)
stealth61 [152]

Answer:

a) if the terms of trade are 4 chips for 1 pretzel, would trade be advantageous for Luxland? explain.

Yes, it is advantageous for Luxland. On its own, Luxland can only produce 1 chip for 1 pretzel, but with trade, 1 pretzel would now be equivalent to 4 chips, representing a net gain of 3 chips.

​​b) if the terms of trade are 4 chips for 1 pretzel, would trade be advantageous for Leanderland? explain.

No, trade would not be advantageous. We can see than domestically, Leanderland can produce 2 pretzels for every chip, because the graph shows that 4 chips are equivalent to 8 pretzels for this nation.

For trade to be advantageous, Leanderland should obtain at least 9 pretzels for the 4 chips.

3 0
2 years ago
On January 1, 2007, Nichols Company’s inventory of Item X consisted of 2,000 units that cost $8 each. During 2007 the company pu
timama [110]

Answer: $45,000

Explanation:

Last In First Out (LIFO) is an inventory valuation and management method that works by selling the most recent inventory to come into the business as opposed to the earlier ones.

In the above, the most recent Inventory to come in is the 5,000 units bought at $10 each.

The 4,500 units sold will therefore come from there.

Cost of Goods Sold = Units Sold * Purchase Price

= 4,500 * $10

= $45,000

4 0
2 years ago
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