Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. richard recently inherited $12,000 and is consider

Richard recently inherited $12,000 and is considering purchasing 12 bonds of the Lucky Corporation. The bond...

Free

70.2K

Verified Solution

Question

Finance

Richard recently inherited $12,000 and is considering purchasing12 bonds of the Lucky Corporation. The bond has a par value of$2,000 with 12 percent coupon rate and will mature in 12 years.Does richard have enough money to buy 12 bonds if the required rateof return is 10 percent?

USE EXCEL FORMULAS SO I CAN SEE THE INPUTS PLEASE AND SHOW THEWORK I WANT TO LEARN IT!

Answer & Explanation Solved by verified expert
4.1 Ratings (756 Votes)

Par/Face value 2000
Annual Coupon rate 0.12
Annual coupon 240
Present Value = Future value/ ((1+r)^t)
where r is the interest rate that is 10% and t is the time period in years
price of the bond = sum of present values of future cash flows
r 0.1
mt 1 2 3 4 5 6 7 8 9 10 11 12
future cash flow 240 240 240 240 240 240 240 240 240 240 240 2240
present value 218.1818 198.3471 180.3156 163.9232 149.0211 135.4737 123.1579 111.9618 101.7834 92.53039 84.11854 713.733
sum of present values 2272.55
The price of each bond $2272.55.
The price of 12 bonds is 12*2275.55
The price of 12 bonds is 27306.6
Richard has inherited $12000, however the price of 12 bonds is $27306.6.
Richard does not have enough money to buy 12 bonds.

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Richard recently inherited $12,000 and is considering purchasing12 bonds of the Lucky Corporation. The bond has a par value of$2,000 with 12 percent coupon rate and will mature in 12 years.Does richard have enough money to buy 12 bonds if the required rateof return is 10 percent?USE EXCEL FORMULAS SO I CAN SEE THE INPUTS PLEASE AND SHOW THEWORK I WANT TO LEARN IT!

Other questions asked by students

Q

d the x intercepts of the quadratic equations A B 2 1 2n 7n

Algebra
Q

Please explain your answer. What general parts of the brain are mostly affected by stroke and why?

Medical Sciences
Q

given diagram substance A Zn and substance B Mn are placed at the ends of...

Physics
Q

Formula Bank X2 Midpoint x x y 2 2 Distance x x Y Name of...

Geometry
Q

A right circular cone is shown. The base of the cone is a circle with...

Basic Math
Q

Problem 17 Write the equation with rectangular coordinates 2 4sin 20

Algebra
Q

FINANCIAL LITERACY Bryn invests 500 in an account with a 2 1 annual interest rate...

Algebra
Q

XP2 5 x 4 y Ve t 3 125X Y EX A 3

Algebra
Q

Accounting Help Please Question 7 A. $248,000 B. $552,000 Question 8 C. $400,000...

Accounting
Q

Consider the following: \table[[,Year 3,Year 2,Year 1],[Total assets,$90,000,$98,000,$48,000

Accounting
Q

NewCorp Co. needs to raise money and issued $650000 in quarterly bonds. These bonds have...

Finance
Q

The chart is free-response, please fill in the correct values. If all correct, I will...

Finance