1. During recessionary periods, bonds that were issued many years ago have a higher coupon rate...

1. During recessionary periods, bonds that were issued many years ago have a higher coupon rate than currently issued bonds. Therefore, they may sell at a premium, a price higher than their face value, because of currently low coupon rates. A $50,000 bond that was issued 15 years ago is for sale for $62,000. What rate of return per year will a purchaser make if the bond coupon rate is 20% per year payable quarterly, and the bond is due 5 years from now? The rate of return is % per year.

2. If a manufacturer of electronic devices invests $620,000 in equipment for making compact piezoelectric accelerometers for general purpose vibration measurement, estimate the rate of return from revenue of $230,000 per year for 10 years and $64,000 in salvage value from the used equipment sale in year 10.

The rate of return is %

Expert Solution

Rahul Sunny answered 1 year ago

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