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 55 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
:D TYSM

mohan

  • Member
  • Posts: 362
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

Nearly 31 million adults in America have a total cholesterol level that is more than 240 mg per dL.

Did you know?

The oldest recorded age was 122. Madame Jeanne Calment was born in France in 1875 and died in 1997. She was a vegetarian and loved olive oil, port wine, and chocolate.

Did you know?

Dogs have been used in studies to detect various cancers in human subjects. They have been trained to sniff breath samples from humans that were collected by having them breathe into special tubes. These people included 55 lung cancer patients, 31 breast cancer patients, and 83 cancer-free patients. The dogs detected 54 of the 55 lung cancer patients as having cancer, detected 28 of the 31 breast cancer patients, and gave only three false-positive results (detecting cancer in people who didn't have it).

Did you know?

The types of cancer that alpha interferons are used to treat include hairy cell leukemia, melanoma, follicular non-Hodgkin's lymphoma, and AIDS-related Kaposi's sarcoma.

Did you know?

The most dangerous mercury compound, dimethyl mercury, is so toxic that even a few microliters spilled on the skin can cause death. Mercury has been shown to accumulate in higher amounts in the following types of fish than other types: swordfish, shark, mackerel, tilefish, crab, and tuna.

Firing Rate of Individual SCN Neurons in a Tissue Culture Color bars have been added to emphasize th Firing Rate of Individual SCN Neurons in a Tissue Culture Color bars have been added to emphasize th
Effects of Therapy for Stuttering A functional MRI scan shows regions of the superior temporal lobe Effects of Therapy for Stuttering A functional MRI scan shows regions of the superior temporal lobe
Chinese workers on a railway in the far West. “Without them,” Leland Stanford, president of the Cent Chinese workers on a railway in the far West. “Without them,” Leland Stanford, president of the Cent
A mere one-half percent of Americans owns over a quarter of the entire nation’s wealth. Very few ... A mere one-half percent of Americans owns over a quarter of the entire nation’s wealth. Very few ...
Catalysis of peptide bond hydrolysis by chymotrypsin (part 2) Catalysis of peptide bond hydrolysis by chymotrypsin (part 2)
Nancy borrowed $8000 from her grandfather to buy a car when she started college. The interest ... Nancy borrowed $8000 from her grandfather to buy a car when she started college. The interest ...
Video: Dietary Cholesterol & LDL

For a complete list of videos, visit our video library