A bond maturing in 10 years pays $80 each and $1000 upon maturity. Assuming 10%

Question

A bond maturing in 10 years pays $80 each and $1000 upon maturity. Assuming 10% to be appropriate discount rate, the present value of the bond is $1,010.84 $925.74 $877.60 $1,000.00 The Fuller Company has received a $50,000 loan. The annual payments are $6,202.70. If the Fuller Company Is paying 9% interest per year, how many loan payments must the company make 15 13 12 19 If the market is in equilibrium, the expected rate of return and the required rate of return will be the same will be different have no relationship to each other The ____ of an asset is the observed value for the asset In the marketplace. intrinsic value liquidation value market value none of the above

Explanation / Answer

38. Value of bond = $80/(1+10%) + $80/(1+10%)2 + $80/(1+10%)3 + $80/(1+10%)4 + $80/(1+10%)5 + $80/(1+10%)6 + $80/(1+10%)7 + $80/(1+10%)8 + $80/(1+10%)9 + $1,080/(1+10%)10

= $877.60 which is option (c)

39. Annual payment = Loan amount * Interest rate * (1 + Interest rate)No. of years / [(1 + Interest rate)No. of years - 1]

=> $6,202.70 = $50,000 * 9% * (1 + 9%)No. of years / [(1 + 9%)No. of years - 1]

Through Trial and error method, No. of years = 15 which is option (a)

40. (a) will be the same

41. (c) market value

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.