This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Suppose that a bond promises to pay 107 next year but the interest rate falls from 7 percent to 3 ... (Read 94 times)

AEWBW

  • Hero Member
  • *****
  • Posts: 579
on: Jun 29, 2018
Suppose that a bond promises to pay 107 next year but the interest rate falls from 7 percent to 3 percent per year. How much will the price of the bond be and why?
 
  What will be an ideal response?

Question 2

Which of the following tariffs resulted in worldwide retaliation against the United States during the Great Depression?
 
  A) the Chicken tariff B) the Pasta Tariff
  C) the Smoot-Hawley tariff D) the Tariff of Abominations


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

raili21

  • Sr. Member
  • ****
  • Posts: 324
Reply #1 on: Jun 29, 2018
Answer to Question 1

At 7 interest the price of the bond would have been 100 because you would need 100 invested at 7 to receive 107 next year. If the interest rate falls to 3 we can use the formula that says the price of the bond is the promised payment divided by one plus the interest rate to calculate that the price would now be 103.88. The price of the bond has risen because at the lower interest rate you would need to invest a larger sum in order to receive 107 next year.

Answer to Question 2

C


AEWBW

  • Member
  • Posts: 579
Reply 2 on: Jun 29, 2018
Excellent

ryhom

  • Member
  • Posts: 366
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

Many medications that are used to treat infertility are injected subcutaneously. This is easy to do using the anterior abdomen as the site of injection but avoiding the area directly around the belly button.

Did you know?

Alzheimer's disease affects only about 10% of people older than 65 years of age. Most forms of decreased mental function and dementia are caused by disuse (letting the mind get lazy).

Did you know?

In the ancient and medieval periods, dysentery killed about ? of all babies before they reach 12 months of age. The disease was transferred through contaminated drinking water, because there was no way to adequately dispose of sewage, which contaminated the water.

Did you know?

Automated pill dispensing systems have alarms to alert patients when the correct dosing time has arrived. Most systems work with many varieties of medications, so patients who are taking a variety of drugs can still be in control of their dose regimen.

Did you know?

According to the American College of Allergy, Asthma & Immunology, more than 50 million Americans have some kind of food allergy. Food allergies affect between 4 and 6% of children, and 4% of adults, according to the CDC. The most common food allergies include shellfish, peanuts, walnuts, fish, eggs, milk, and soy.

20,000 year old spotted hyena painting from the Chauvet Cave, France 20,000 year old spotted hyena painting from the Chauvet Cave, France
How to solve a linear algebraic bank interest problem with two unknowns How to solve a linear algebraic bank interest problem with two unknowns
Consider the production function ( ) 0.5 0.5 Y = AK L . Suppose both saving rate (s) and the ... Consider the production function ( ) 0.5 0.5 Y = AK L . Suppose both saving rate (s) and the ...
The amino acid lysine has the percent composition 49.3% C, 9.59% H, 19.2% N, and The amino acid lysine has the percent composition 49.3% C, 9.59% H, 19.2% N, and
The age-adjusted rate of melanoma, a deadly form of skin cancer, from 1973 to 2000. Over that time p The age-adjusted rate of melanoma, a deadly form of skin cancer, from 1973 to 2000. Over that time p
No payments were made on a $2,598 loan during its three-year term. What was the annually ... No payments were made on a $2,598 loan during its three-year term. What was the annually ...
Video: Causes of Acne

For a complete list of videos, visit our video library