The effective annual cost of not taking advantage of the 1/10, ...

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The effective annual cost of not taking advantage of the 1/10, net 60 terms offered by a supplier is
 
  A) 6.69. B) 5.37. C) 7.27. D) 1.50.

Question 2

The Bonsai Nursery Corporation has 1,000 par value bonds with a coupon rate of 8 per year making semiannual coupon payments.
 
  If there are twelve years remaining prior to maturity and these bonds are selling for 876.40, what is the yield to maturity for these bonds?
  A) 9.80
  B) 8.00
  C) 9.77
  D) 8.33

[Fayaz00962]

Answer to Question 1

C

Answer to Question 2

Answer: C
Explanation: C) The answer is found through an iterative (trial and error) process using the bond pricing formula. Bond Price = PMT  + ;
876.40 = 40  + ;
r = 4.885817
YTM = 4.885817  2 = 9.77.
MODE = END, P/Y = 2, C/Y = 2
INPUT 24 ? -876.40 40 1,000
KEY N I/Y PV PMT FV
CPT 9.77