Find the Gain or Loss on the Sale Without Constructing

question 54

Essay

Find the gain or loss on the sale without constructing a bond schedule for six $5000, 9.5% bonds with interest payable semi-annually redeemable at par bought twenty-one years before maturity to yield 10.5% compounded semi-annually. The bonds were sold three years later at 103.625.

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Definitions:

Midpoint Formula

A method for calculating the percentage change in a variable by dividing the change by the average of the initial and final values, often used in economics to measure elasticity.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate, in a given time period.

Elastic

In economics, elastic refers to how the quantity demanded or supplied of a good responds to changes in its price; high elasticity indicates sensitivity to price changes.

Cross-price Elasticity

Cross-price Elasticity measures the responsiveness of the demand for one good to a change in the price of another good.