Determine the effective rate of return

Assignment Help Business Economics
Reference no: EM131806390

Mike buys a corporate bond with a face value of $1000 for $900. The bond matures in 10 years and pays a coupon interest rate of 6%. Interest is paid every quarter.

(a) Determine the effective rate of return if Mike holds the bond to maturity.

(b) What effective interest rate will Mike get if he keeps the bond for only 5 years and sells it for $950?

Reference no: EM131806390

Questions Cloud

Particular attention to the appropriate organizational plan : Appropriate context for a business letter and a memo and paying particular attention to the appropriate organizational plan
How much is the net cash from financing investing activities : how much is the net cash from financing investing activities during the year
Mildred can purchase a municipal bond with a par : Mildred can purchase a municipal bond with a par (face) value of $5000 that will mature in 31/2 years. The bond pays 8% interest compounded quarterly.
What is the rate of return for the generator : A diesel generator for electrical power can be purchased by a remote community for $480,000 and used for 10 years, when its salvage value is $50,000.
Determine the effective rate of return : The bond matures in 10 years and pays a coupon interest rate of 6%. Interest is paid every quarter.
What initial ideas do you now have for building culturally : What initial ideas do you now have for building culturally responsive and respectful relationships with families of infants and toddlers?
Discuss the auditor has been ethical : A manager states that as long as the auditor has followed all applicable laws, the auditor has been ethical
Discuss news events that fit your personal background : As part of the APUS efforts for innovation in technology, your instructor has created news feed links that are specific to the subject of business.
Contributed by meenakshi sundaram-tennessee tech university : Determine what the maturity date should be so that the purchaser may enjoy a 12% nominal rate of return on this investment.

Reviews

Write a Review

Business Economics Questions & Answers

  Discuss with your colleagues how you think research

Check your client's Web site to find out if it discusses its business plans for now and in the future. This is often found in a public company's annual report. Private companies sometimes list their business activities under the "About Us" or "Newsro..

  Calculate the average annual rates of productivity growth

Productivity growth measures increase in output per hour of work. Output per hour of work was 54.0 in the first quarter of 1973, 75.4 in the first quarter of 1996, and 111.0 in the first quarter of 2010 (2005=100). Calculate the average annual rates ..

  How many footballs will be produced and consumed

Consider the market for footballs. Suppose the demand for footballs is given by F = 50 P − 1. (1) Suppose further that the marginal private cost of producing footballs is $10 per football. Suppose the football market is competitive. What price will t..

  Values using the equations and then financial calculator

Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually.

  Find the federal funds rate recommended by the taylor rule

The equilibrium real fed funds rate is 2%, the inflation target is 2% and the growth rate of potential output is 3%. If inflation is 8% and output growth is 6%, find the federal funds rate recommended by the Taylor Rule.

  What is the monthly instalment of the loan payment

(a) What is the monthly instalment of the loan payment? (b) What will be the remaining loan balance after four years of the loan period?

  Total consumer surplus can be measured for good

Total consumer surplus can be measured for good X by:

  Maintains the proper levels of chemicals in the water

EverKleen Pool Services provides weekly swimming pool maintenance in Atlanta. Dozens of firms provide this service. The service is standardized; each company cleans the pool and maintains the proper levels of chemicals in the water. At what output le..

  Carbon tax-determinant of demand or supply is being affected

Carbon tax: Suppose the government imposes a carbon tax on oil production. Will this affect the supply or the demand for gasoline? Why? Which determinant of demand or supply is being affected?

  What was the total cost to firm of issuing the securities

Suppose that a biotech firm in Pittsburgh raised $113 million in an IPO. The firm received $23 per share, and the stock sold to the public for $25 per share. The firm’s legal fees, SEC registration fees, and other out-of-pocket costs were $657,500. T..

  Given the payoff matrix to this advertising game

Two firms compete by advertising. Given the payoff matrix to this advertising game, identify each firm's best response to its rival's possible actions. Does either firm have a dominant strategy? What is the Nash equilibrium?

  What is the median amount of household debt

Consumers borrow money for many different reasons, including the purchase of a home, car, and appliances, to remodel, or to help pay for college. Approximately 75% of U.S. households carry some debt. What is the median amount of household debt? Provi..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd