Retirement thinks that the interest rates in the marketplace

Assignment Help Financial Management
Reference no: EM13925457

An engineer planning for his retirement thinks that the interest rates in the marketplace will decrease before he retires. Therefore, he plans to invest in corporate bonds. He plans to buy a $50,000 bond that has a bond interest rate of 12% per year, payable quarterly with a maturity date 20 years from now. (a) How much should he be able to sell the bond for in 5 years if the market interest rate is 8% per year, compounded quarterly? (b) If he invested the interest he received at an interest rate of 12% per year, compounded quarterly, how much will he have (total) immediately after he sells the bond 5 years from now?

Reference no: EM13925457

Questions Cloud

Explain the sampling distribution : What can you say about the shape of the sampling distribution of ?
What is your forecast for the alpha of stock x : You believe that stock X is 25 percent undervalued, and that it will take 3.1 years for half of this misvaluation to disappear. What is your forecast for the alpha of stock X over the next year?
What is the major problem facing jennifer : What coordinative mechanisms does First Community use to manage the potential conflict between its sales and finance/ auditing functions - What do you predict wiJI be her management/leadership style?
Identify the independent and dependent variables : Assignment: Explain whether you chose to use an independent-samples t test or a matched-samples t test. Provide a rationale for your choice. Identify the independent and dependent variables
Retirement thinks that the interest rates in the marketplace : An engineer planning for his retirement thinks that the interest rates in the marketplace will decrease before he retires. Therefore, he plans to invest in corporate bonds. How much should he be able to sell the bond for in 5 years if the market inte..
Receptionist at a real-estate company : Julia works as a receptionist at a real-estate company. Her boss just came in the door and yelled at her, telling her that the front office was a mess and that she needed to get up and clean it immediately. After her boss left the room, Julia grabb..
What is the value of an option which pays one dollar : What is the value of an option which pays $1 in 1 year only in the state defined by rQ = 5 percent? Assume that the probability of that state occurring is 50 percent.
Explain what accessibility and redundancy mean : Explain when sound is not a good idea, and give examples. Explain what "accessibility" and "redundancy" mean and why it is appropriate to incorporate in ethical design.
Mean-per-unit estimation technique : A CPA has selected and audited a sample of 100 accounts with a total book value of $1,000 and an audited value of $1,200. Using the mean-per-unit estimation technique, the estimated total audited value of the population is:

Reviews

Write a Review

Financial Management Questions & Answers

  Determine the year-to-year percentage annual growth

Determine the year-to-year percentage annual growth in total net sales. Determine the target revenue figure, and explain why you do or do not feel that the company hit its target

  Average accounting return method of project analysis

Which one of these is strength of the average accounting return method of project analysis?

  What will be the price of the one share

The Know-It-All Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20% a year for the next 4 years and then decreasing the growth rate to 5% per year. The company just paid its annual dividen..

  Non-financial information should accountants disclose

The numbers don't tell the whole story. Accountants use notes to the financial statements to provide additional information and clarification. What types of non-financial information should accountants disclose? Some people argue that you can never i..

  What are the depreciation amounts in year one and year eight

An injection molding machine can be purchased and installed for $90,000. It is expected to be kept in service for eight years. It is believed that $10,000 can be obtained when the machine is disposed of the at the end of year eight. What are the depr..

  Define classes of shares with unequal rights

When comparing common stock of the same company it is fair to say that all shares, no matter how many classes, are all created with the same equal rights. companies sometimes have two different classes of shares with unequal rights to dividends an..

  Find the effective annual yield rate

You purchase a 20-year 10% annual coupon bond with a face value of 1000, and a yield rate of 9%. It is a callable corporate bod, with a call price of 1025. It can be called after five years post issuing. After the 8th coupon payment, the issuing corp..

  Natural gas futures to hedge its costs of power production

Chevron is considering the use of natural gas futures to hedge its costs of power production. Which of the following methods is Chevron most likely to use to deem this hedge highly effective?

  Negatively impacts their long term capital budgeting.

A frequent criticism of the management of publicly-owned American companies is that they are too short-term oriented, too focused on fast returns, and that this negatively impacts their long term capital budgeting.

  Roles of homemade leverage

Define and discuss MM Proposition I with its implications, and the roles of homemade leverage and the Law of One Price in the development of the proposition.

  What is the average amount of receivables

McDowell Industries sells on terms of 3/10, net 40. Total sales for the year are $779,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 54 days after their purchases. What is the average amount of ..

  1 a japanese exporter to brazil would like to sell its

1. a japanese exporter to brazil would like to sell its brl300m receivables in the spot market against yen. the

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