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2 years ago

when investors doubt the creditworthiness of a borrower, what should happen to the price and yield of a bond

Business

1 answer:

denpristay [2]2 years ago

7 0

Answer:

Prices go down, yield go up

Explanation:

As we know that there is an opposite relationship between the price of the bond and the yield that means if the creditworthiness comes in a doubt so it reduced the price of the bond and at the same time it increased the yield

So as per the given situation as the investor doubt the borrower creditworthiness so the price would fall and yield would go up

hence, the same is to be considered

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You have $12,500 you want to invest for the next 30 years. You are offered an investment plan that will pay you 7 percent per ye

Alchen [17]

Answer:

Future value= $151,018.51

Explanation:

Future value of money measures how much a present amount of money will be in the future at a given interest rate.

The interest gained on money shows the time value of money. One dollar today is less than one dollar in one year's time

The formula for future value is

Future value = Present value * (1 + rate)^time

As we have two periods in this case (10 years and 20 years)

Future value = Present value * {(1 + rate1)^time1} * {(1 + rate2)^time2}

Future value = 12,500 * {(1 + 0.07)^10} * {(1 + 0.095)^20}

Future value= $151,018.51

4 0

2 years ago

BTR Co. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000

Marina CMI [18]

Answer: the yield to maturity and yield to call on BTR Co.'s bonds are:

YTM = 0.07507 (7.507%)

YTC = 0.06977 (6.977%)

Explanation:

Using yield to maturity formula below;

YTM = C + (fv - pv)/n ÷ (fv+pv) /2

C = coupon rate ; 9% of par value

9% of $1000

= 9/100 × 1000 = $90

fv = face value/par value = $1,000

pv = price value/market price = $1,160.35

n = number of years to maturity = 18

YTM = 90 + (1000 - 1160.35)/18 ÷ (1000+1160.35)/2

YTM = 90 + (-160.35)/18 ÷ (2160.35)/2

YTM = 90 + (-8.90833333)

÷ 1080.175

YTM = 81.0916667 ÷ 1080.175

YTM = 0.07507

= 7.507% (converted to percentage)

To calculate the yield to call, let s make use of the yield to call (YTC) formula below;

YTC = C + (cp - mp)/n ÷ (cp + mp)/2

C= coupon rate = $90

cp = call price = $1,060

mp = market price/price value = $1,160.35

n = number of years to call = 8

YTC = 90 + (1060-1160.35)/8 ÷ (1060+1160.35)/2

YTC = 90 + (-100.35)/8 ÷ (2220.35)/2

YTC = 90 - 12.54375 ÷ 1110.175

YTC = 77.45625 ÷ 1110.175

YTC = 0.06977

= 6.977% in percentage

5 0

2 years ago

You are the manager of a firm that produces products X and Y at zero cost. You know that different types of consumers value your

love history [14]

Answer:

Consider the following calculations

Explanation:

a) If you charge $40 for X then everyone will buy as everyone is willing to pay atleast $40. this means all three groups buy that is 3*1000 buyers.So profit from X = 3000*40= $120,000

And since everyone is willing to willing to pay atleast $60 for Y again all three groups will buy so profit from Y =3000*60=$180,000

profits=$300,000

b) if you charge $90 and $160 for X and Y respectively you will have only 1000 buyers for each product as others are unwilling to pay this much.

So profits = 1000*90 + 1000*160=$250,000

c) for a bundle of X and Y buyers are willing to pay a total of $150, $210 and $200 across the three categories.

So everyone will buy a bundle of 1 X and 1 Y.

profits = 150*3000= $450,000

d) If you charge $210 only the second will buy as they are willing to pay that much so profits =1000*210=$210,000

Also by selling X at $90 group 1 will buy X; profits=1000*90=$90,000

and by selling Y at $160 group 3 will buy Y; profits=1000*160=$160,000

total profits =$460,000

5 0

2 years ago

Which two skills and abilities are essential for a ship captain?

Maksim231197 [3]

Leadership skills and compassion good vision

3 0

2 years ago

Read 2 more answers

From her sales income, barbara has subtracted cost of goods sold, operating expenses, interest expense, and taxes. what she has

Murrr4er [49]

The answer is net income
Net income is the amount of capital that the Company's made during an operational year after all relevant expenses have already been deducted.
Some amount of the net income will be shared to shareholders according to the percentage, and some of it will be put in company's capital to expand the operation.

6 0

2 years ago