What nominal and effective annual rate of return

Assignment Help Business Economics

Reference no: EM13742712

A well-known industrial firm has issued $1,000 bonds with a 4% coupon interest rate paid semi annually. The bonds mature 20 years from now. From the financial pages of your newspaper you learn that the bonds may be purchased for $715 each ($710 for the bond plus a $5 sales commission). What nominal and effective annual rate of return would you receive if you purchased the bond now and held it to maturity 20 years from now?

Reference no: EM13742712

Questions Cloud

Semiconductor manufacturing involves taking a flat disc : Semiconductor manufacturing involves taking a flat disc of silicon, called a wafer, and depositing many layers of material on top of it. Each layer has a pattern on it that, upon completion, defines the electrical circuits of the finished microproces..

Would you recommend that the pipeline be installed : Fifteen families live in Willow Cannon. Although several water wells have been drilled, none has produced water. The residents take turns driving a water truck to a fill station in a nearby town.

Endowment effects : Endowment effects. Surveys and experiments reveal that people sometimes demand much more to give up something that they have than they would be willing to pay to acquire it. To illustrate, contrast a situation in which people have an opportunity to “..

What rate of return did she receive on her investment : An investor bought a one-acre lot on the outskirts of a city for $9000 cash. Each year she paid $80 of property taxes. At the end of 4 years, she sold the lot for a net value of $15,000. What rate of return did she receive on her investment?

What nominal and effective annual rate of return : A well-known industrial firm has issued $1,000 bonds with a 4% coupon interest rate paid semi annually. The bonds mature 20 years from now. From the financial pages of your newspaper you learn that the bonds may be purchased for $715 each ($710 for t..

Indifference curve mapping with ice cream cones on x-axis : Suppose that a person always consumes 3 scoops of ice cream with 1 ice cream cone. Show such preferences in an indifference curve mapping with ice cream cones on the x-axis.

Marginal rate of substitution at this point : Draw Bob's budget constraint (put skinny ties on the horizontal axis). Bob’s preferences lead him to choose a combination of 4 DVDs and 30 skinny ties. Draw the indifference curve that leads him to this choice. What is his marginal rate of substituti..

Negligence rule is necessarily vague : “If the legal standard of care in a negligence rule is necessarily vague, the court should set it below the level of efficient precaution.” Explain the economic argument in favor of this proposition. Doctors are liable when their negligence injures p..

What is the socially optimal level of drugs bought and sold : Suppose Merck is developing new drugs that have positive externalities; the positive externality is a pharmaceutical technology we all benefit from. Let the supply curve for Merck’s production be P =Q/4, where Q is the number of units of drugs they’v..

User Account

All Pages