Business, 13.08.2020 21:01 gunnatvinson

Calculate the effective annual interest rate for the following: a. A 3-month T-bill selling at $97,820 with par value $100,000. (Round your answers to 2 decimal places.) b. A 8% coupon bond selling at par and paying coupons semiannually.

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Answer from: joeylozier15

A.9.2%

B.8.16%

Explanation:

a. Calculation for the Effective annual rate on three-month T-bill

First step

T-bill =(Par value-Selling amount)/Par value

Let plug in the formula

T-bill =($100,000-$97,820)/$97,820

T-bill =$2,180/$97,820

T-bill =0.02228

Now let calculate for the Effective Annual Interest rate

Effective Annual Interest rate = (1 + 0.02228)^4– 1

Effective Annual Interest rate = (1.02228)^4-1

Effective Annual Interest rate =1.0921-1

Effective Annual Interest rate =0.0921×100

Effective Annual Interest rate=9.2%

B. Calculation for the effective annual interest rate for A 8% coupon bond .

First step

Semi-annual return=8%/2

Semi-annual return=4%

Second step is to calculate for the effective annual interest rate

Using this formula

Effective annual interest rate =(1+Semi-annual return percentage)^2-1

Let plug in the formula

Effective annual interest rate=(1+0.04)^2-1

Effective annual interest rate=(1.04)^2-1

Effective annual interest rate=1.0816-1

Effective annual interest rate=0.0816×100

Effective annual interest rate=8.16%

Therefore the Effective annual rate on three-month T-bill will be 9.2% while that of coupon bond is 8.16%

Answer from: Quest

the new gas bill will be 0

Answer from: Quest

1 all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

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