Question

In: Finance

B. There is a 30 year bond, which pays 6% per annum at the time that...

B. There is a 30 year bond, which pays 6% per annum at the time that required rates are10%. We buy with the intention of selling it in 4 years at which time the required rate is 6%. How much do we sell it in 4 years, and how much do we buy it now?

Expert Solution

Use PV function to find the prices now and after 4 years.

=PV(rate,nper,pmt,fv,type)

a. If you want to buy now

rate=10%

nper=30 years

pmt=coupon*face value=6%*1000=60

fv=face value=1000

=PV(10%,30,60,1000,0)=$622.92

if you wants to buy now=$622.92

b. If you want to sell after 4 years

rate=6%

nper=30-4=26 years

pmt=60

fv=1000

=PV(6%,26,60,1000,0)=$1000

The price at which you sell after 4 years=$1000

jeff jeffy answered 2 years ago

There is a 30 year bond, which pays 6% per annum at the timethat required...

There is a 30 year bond, which pays 6% per annum at the time that required rates are10%. We buy with the intention of selling it in 4 years at which time the required rate is 6%. How much do we sell it in 4 years, and how much do we buy it now?

What is the duration of a 2-year bond that pays a coupon of 8% per annum...

What is the duration of a 2-year bond that pays a coupon of 8% per annum semiannually? It has a face value of $100. The yield on the bond is 10% per annum with continuous compounding.

What is duration of a 2-year bond that pays a coupon of 8% per annum semiannually?...

What is duration of a 2-year bond that pays a coupon of 8% per annum semiannually? The yield on the bond is 10% per annum with continuous compounding. (Show Work)

6. Suppose today that you paid $1,200 for a 30-year bond that pays $50 at the...

6. Suppose today that you paid $1,200 for a 30-year bond that pays $50 at the end of Years 1-29 and $1500 at the end of Year 30. What would be the bond’s IRR? (A bond’s IRR is often called the yield of the bond). 7. I now have $350,000 in the bank. At the end of each of the next 25 years, I withdraw $15,000. If I earn 7 percent per year on my investments, how much money will...

A bond is in a risk class that pays 5% per year. The bond pays annual...

A bond is in a risk class that pays 5% per year. The bond pays annual interest of $400 (and the first interest payment is one year from today) and will mature in 10 years at a value of $10,000. What is the price of the bond?

Determine the market price of a $3,000,000, 5-year, 6% (pays interest quarterly) bond. At the time...

Determine the market price of a $3,000,000, 5-year, 6% (pays interest quarterly) bond. At the time of issuance, the market interest rate for similar financial instrument is 8%. Required: a) Compute the selling price of the bond (round to nearest dollar) b) Record the journal entry upon issuance of the

A 30-year bond is purchased at a discount. The bond pays annual coupons. The amount for...

A 30-year bond is purchased at a discount. The bond pays annual coupons. The amount for accumulation of discount in the 15th coupon is 147. The amount for accumulation of discount in the 19th coupon is 200. Calculate the amount of discount in the purchase price of this bond

Consider the following two bond issues. Bond M: 4% 30-year bond Bond N: 6% 30-year bond...

Consider the following two bond issues. Bond M: 4% 30-year bond Bond N: 6% 30-year bond Neither bond has an embedded option. Both bonds are trading in the market at the same yield. Which bond will fluctuate more in price when interest rates change? Why?

Calculate the simple interest. (6 marks) Principal Rate per Annum Time Simple Interest $1356.78 8% 6...

Calculate the simple interest. Principal Rate per Annum Time Simple Interest $1356.78 8% 6 years $685.43 9.25% 7 months $1595.85 7.75% 185 days Calculate the principal. Simple Interest Rate per Annum Time Principal $1275.00 8.5% 3 years $585.90 9.25% 5 months $210.75 8.75% 63 days Calculate the interest rate per annum correct to 1 decimal place. Principal Simple Interest Time Rate per Annum $10,563.77 $7394.64 7 years $6854.25 $433.53 11 months $450.00 $7.22 66 days Calculate the simple interest, then...

jack deposits the following amounts in a savings plan which pays 4.2% per annum, compounded monthly:...

jack deposits the following amounts in a savings plan which pays 4.2% per annum, compounded monthly: $2571 today, $1100 at the end of year two and $1500 at the end of year three. The amount he will have in exactly 3 years is closest to: