Jackie K.

asked • 10/17/12

stocks and bond

Abby Sane decided to buy corporate bonds instead of stock. She desired to have the fixed-interest payments. She purchased 9 bonds of Meg Corporation 11 3/4  % at 90.00. As the stockbroker for Abby (assume you charge her a $9 commission per bond).

a) Calculate the total cost of the purchase. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Total cost $=

(b) Calculate the total annual interest to be received. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Total annual interest $=

(c) Calculate the current yield. (Round your answer to the nearest tenth percent. Omit the "%" sign in your response.)

Current yield %=

1 Expert Answer

By:

Scott T. answered • 10/17/12

Tutor
5 (1)

Math and Science Tutoring from an MIT Masters in Engineering

Jackie K.

HI, MR. SCOTT I HAVE CORRECTED THE WORD PROBLEM AND THANK YOU FOR YOUR HELP

Report

10/17/12

Scott T.

Hi Jackie,

I wonder if the 11.75% is the coupon rate for your bond?  Do you see anything that references a "face value" or "clean price" for the bond?


It seems like this is more of a finance question than a math question, but we should be able to get to the bottom of it.

Report

10/17/12

Jackie K.

YES THE FACE VALUE IS 1000 IM SO SORRY I FORGOT TO ADD
Report

10/17/12

Scott T.

Hi Jackie,

The face value of $1000 makes sense, but then I'm wondering if the price is $90.00.  This would be pretty unusual! Are you sure the price is $90.00?


Also, that 11.75% number, does the problem say that this is a coupon rate?

Thanks!

Scott

Report

10/17/12

Jackie K.

NO IT DOES NOT
Report

10/17/12

Jackie K.

thank you sooo much i understand now .... I do I rate you Im a newbie
Report

10/17/12

Scott T.

Glad I could help - I think you have a chance to click the Thumbs Up, and maybe because you asked the question you can also choose the best answer.  I'm actually not sure myself because I just discovered this whole question/answer thing too !

 

Cheers~

Report

10/17/12

Still looking for help? Get the right answer, fast.

Ask a question for free

Get a free answer to a quick problem.
Most questions answered within 4 hours.

OR

Find an Online Tutor Now

Choose an expert and meet online. No packages or subscriptions, pay only for the time you need.