BUSN 380 help Making Decisions/uophelp.com BUSN 380 help Making Decisions/uophelp.com | 页面 54

c. In your own words, explain why your bond increased or decreased in
value.
The value of my bond increased because people would want to buy my
bond at $1000 because the same bond at 8% would cost more. My bond
had a fixed interest rate of 9.5 percent during a time period when interest
rates in the economy were declining.
5. Using Margin. Bill Campbell invested $4,000 and borrowed $4,000
to purchase shares in Wal-Mart. At the time of investment, Wal-Mart
was selling for $45 a share.
a. If Bill paid $30 commission, how many shares could Bill buy if he
used only his own money and did not use margin?
b. If Bill paid $50 commission, how many shares could Bill buy if he
used his $4,000 and borrowed $4,000 on margin to buy Wal-Mart stock?
c. Assuming that Bill did use margin, paid $90 commission to sell his
stock, and sold his Wal-Mart stock for $53, how much profit did he
make on his Wal-Mart investment?
6. Calculating yields.
Assume you purchased a corporate bond at its current market price of
$850 on January 2, 2002. It pays 9 percent interest and it will mature on
December 31, 2011, at which time the corporation will pay you the face
value of $1,000.
a. Determine the current yield on your bond investment at the time of
purchase.
b. Determine the yield to maturity on your bond investment.
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