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Author Question: A bond will sell at a premium (above par value) if A) investor's current required rate of return ... (Read 90 times)

melina_rosy

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on: Jul 10, 2018
A bond will sell at a premium (above par value) if
 
  A) investor's current required rate of return is below the coupon rate of the bond.
  B) current market interest rates are moving in the same direction as bond values.
  C) the market value of the bond is greater than the discount rate of the bond.
  D) the economy is in a recession.

Question 2

The Knight Corporation projects that next year its fixed costs will total 240,000. Its only product sells for 34
  per unit, of which 18 is a variable cost.
 
  The management of Knight is considering the purchase of a new
  machine that will lower the variable cost per unit to 14. The new machine, however, will add to fixed costs
  through an increase in depreciation expense. How large can the addition to fixed costs be in order to keep the
  firm's break-even point in units produced and sold unchanged?
Foundations of Finance ¦ Keown, Petty, Martin ¦ 9th Edition
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heinisk01

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Reply #1 on: Jul 10, 2018
Answer to Question 1

A

Answer to Question 2

Step 1 Compute the percent level of break-even output:
QB = F/(P-V) = 240,000/(34-


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