Risk premiums on corporate bonds tend to ( ) during business cycle expansions and ( ) during recessions, everything else held constant. increase; increase increase; decrease decrease; increase decrease; decrease

Risk premiums on corporate bonds tend to ( ) during business cycle expansions and ( ) during recessions, everything else held constant. increase; increase increase; decrease decrease; increase decrease; decrease

College Algebra

1st Edition

ISBN:9781938168383

Author:Jay Abramson

Publisher:Jay Abramson

Chapter6: Exponential And Logarithmic Functions

Section: Chapter Questions

Problem 8RE: Suppose an investment account is opened with aninitial deposit of 10,500 earning 6.25...

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Straight-line DepreciationBook value is the value of an asset that a company uses to create its balance sheet.Some companies depreciate their assets using straight-line depreciation so that thevalue of the asset declines by a fixed amount each year. The amount of the declinedepends on the useful life that the company assigns to the asset. Suppose that acompany just purchased a fleet of new cars for its sales force at a cost of $31,500 percar. The company chooses to depreciate each vehicle using the straight-line methodover 7 years. This means that each car will depreciate by +31,500 7 = +4500 per year.(a) Write a linear function that expresses the book value V of each car as a functionof its age, x.(b) Graph the linear function.(c) What is the book value of each car after 3 years?(d) Interpret the slope.(e) When will the book value of each car be $9000?[Hint: Solve the equation V1x2 = 9000.]
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2. An insurance company uses the model above to calculate premiums for a special T-year term life insurance policy. The basic sum insured is $100,000, but the death benefit is $150,000 if death occurs as a result of an accident. The death benefit is payable immediately on death. Premi- ums are payable continuously throughout the term. The effective rate of interest is 3% per year and there are no expenses. The policy is issued to a life aged 35. 毎回 (ii) (iii) calculate the annual premium for this policy calculate the policy value at time 1, 2, 1-2, 1-1 and t in state Q comment on the results in (ii)
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3.) Suppose that deflation occurs in the U.S. economy and that the CPI (as a measure of f) is expected to decrease an average of 1% per year for the next five years. A bond with a face (par) value of $10,000 and a life of five years (i.e., it will be redeemed in five years) pays an interest (bond) rate of 4% per year. The interest is paid to the owner of the bond once each year. If an investor expects a real rate of return of 3% per year, what is the maximum amount that should be paid now for this bond?
Example 22: Calculate return on equity shareholders' funds: Particulars Particulars Current Liabilities Long-term Debt (Deb.) 18% Pref. Share Capital 1,00,000 Equity Share Capital Reserves 3,40,000 | Net Profit after Interest & Tax 8,00,000 | Fixed Assets 4,40,000 12,00,000 1,00,000 60,000 40,000 1,00,000 Trade Inyestments 1,00,000 Preliminary Expenses 60,000 | Underwriting Commission 4,40,000 Profit & Loss A/c (Cr.) Current Assets