chapter 15
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Finance
Date
Jan 9, 2024
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1.
Jean Miller purchased a $1,000 corporate bond for $880. The bond paid 3% annual
interest. Three years later, she sold the bond for $960. Calculate the total return for Ms.
Miller’s bond investment. (LO 15.3)
The total return for Ms.Miller’s bond investment would be, [$1,000(Value)
* 0.03(Interest)] *3 (Years) = $90. This is the total interest, which will help
find the total return. TR is equal to, $90 + ($960 - $880) = $90 + $80
=$170 (TR).
2.
Mark Crane purchased a $1,000 corporate bond 5 years ago for $1,060. The bond paid
2.5% annual interest. Five years later, he sold the bond for $950. Calculate the total return
for Mr. Crane’s bond investment. (LO 15.3)
The total return for Mr. Crane’s bond investment is, ($1,000 * 0.025) * 5 =
$125, $125 + ($950-$1,060) = $15.
3.
Sandra Waterman purchased a 52-week, $1,000 T-bill issued by the U.S. Treasury. The
purchase price was $984. (LO 15.4)
a.
What is the amount of the discount?
i.
The amount of the discount is, $1,000 (T-bill) - $984
(purchase price) = $16.
b.
What is the amount Ms. Waterman will receive when the T-Bill matures?
i.
The amount Ms. Waterman will receive when the T-Bill
matures would be, $1,000.
c.
What is the current yield for the 52-week T-Bill?
i.
The current yield for the 52-week T-Bill is [$16 (DP) /
$984 (PP)]* 100= 16.26%.
5.
Assume you own shares in Walmart and that the company currently
earns $6.93 per share and pays annual dividend payments that total $2.16
a share each year. Calculate the dividend payout for Walmart. (LO 14.3)
The dividend payout for walmart would be, $2.16 /$6.93 = 0.3116 =
31.16%
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