Business, 23.04.2020 04:33 Erin1535

Midland Utilities has outstanding a bond issue that will mature to its $1,000 par value in 11 years. The bond has a coupon interest rate of 13% and pays interest annually

a. Find the value of the bond if the required return is (1)13%, (2)17%, and (3) 10%.

b. Use your finding in part a to discuss the relationship between the coupon interest rate on a bond and the required return and the market value of the bond relative to its par value.

c. What two possible reasons could cause the required return to differ from the coupon interestrate?

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Answer from: 22lzawis

at 13% --> $1,000

at 17% -->$806.54

at 10% --> $1,194.85

When the rates do not match people will only accept the bond if their desired market return can be acheive. Because, the coupon payment are fixed the only way to do so is by changing the price ofthe bond.

So bond with coupon rate above market are trade at a price higher than face value while, below market traded at lower price.

Explanation:

The market value of a bond is the present value of the future coupon payment and maturity given the current market rate

When the market rate matches the coupon rate then the bond is at par and sales at face value.

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C130.000

time11

rate0.17

$130 \times \frac{1-(1+0.17)^{-11} }{0.17} = PV\\$

PV$628.7337

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity 1,000.00

time 11.00

rate 0.17

$\frac{1000}{(1 + 0.17)^{11} } = PV$

PV 177.81

PV c$628.7337

PV m $177.8097

Total$806.5435

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C130.000

time11

rate0.1

$130 \times \frac{1-(1+0.1)^{-11} }{0.1} = PV\\$

PV$844.3579

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity 1,000.00

time 11.00

rate 0.1

$\frac{1000}{(1 + 0.1)^{11} } = PV$

PV 350.49

PV c$844.3579

PV m $350.4939

Total$1,194.8518

Answer from: Quest

steering wheels are always situated on the left side of the car.

always drive on the right side of the road.

white lines separate lanes of traffic traveling the same direction.

hashed or broken lines means you may change lanes when it is safe.

solid white lines mean stay in your lane.

yellow lines separate traffic moving in opposing directions.

hashed or broken yellow lines mean you can carefully pass, paying attention to oncoming traffic.

never cross a solid yellow line (or double yellow line).

when turning left at an intersection, pass in front of any cars that are turning left from the opposing direction (do not try to pass behind them).

use the left lane to pass other cars traveling your direction.

do not pass in the right lane unless absolutely necessary.

if you are driving in the far left hand lane and someone would like to pass you, move over to the right lane when it is safe to do so and allow them to pass.

you must always yield to pedestrians.

come to a complete stop whenever you see pedestrians trying to cross the street.

never pass a school bus if it has flashing red lights. wait until the lights have stopped.

be aware of bicyclists. often they share the road with cars and are supposed to also follow general traffic laws.

be particularly careful about driving in cities with bike lanes -- always check before turning that a bike is not coming.

it is mandatory to pull over or stop at an intersection to allow an emergency vehicle to pass you if you see one traveling with lights flashing and/or a siren running.

do not overuse your car horn. horns are used almost exclusively for emergency situations or for when you feel unsafe.

explanation:

Answer from: Quest

d. all of the above are true.

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