Question

1. A _______ is a long-term debt instrument that promises to pay interest periodically as well as a principal amount at maturity to the investor. (answer is one word, four letters)

2. The rate used to determine the amount of cash the investor receives is the ______ rate. (answer is one word, six letters)

3. The interest rate bond investors expect for their investment is the ______ i rate of interest. (answer is one word, six letters)

4. A company issues 10% bonds at a time when other bonds of similar risk are paying 12%. These bonds will sell at a ________________. (one word, eight letters)

5. A company issues 10% bonds at a time when other bonds of similar risk are paying 8%. These bonds will sell at a ________________. (one word, seven letters)

6. Payment for the use of money is  (one word, 8 letters)

7. A series of equal dollar amounts to be paid or received at evenly spaced time intervals is a (or an)  

-discount

-future value

-present value

-annuity

8. For a single payment: what is the present value factor for four periods at a discount rate of 11%?

9. For a single payment: what is the present value factor for sixteen periods at a discount rate of 10%?

10. For a single payment: what is the present value factor for one period at a discount rate of 10%?

11. For an annuity: what is the present value factor for nine periods at a discount rate of 12%?

12.For an annuity: what is the present value factor for twenty periods at a discount rate of 8%?

13. For an annuity: what is the present value factor for five periods at a discount rate of 8%?

Answer 1

Solution 1:

A "Bond" is a long-term debt instrument that promises to pay interest periodically as well as a principal amount at maturity to the investor.

Solution 2:

The rate used to determine the amount of cash the investor receives is the coupon rate.

Solution 3:

The interest rate bond investors expect for their investment is the "Market" i rate of interest.

Solution 4:

A company issues 10% bonds at a time when other bonds of similar risk are paying 12%. These bonds will sell at a "Discount"

Solution 5:

A company issues 10% bonds at a time when other bonds of similar risk are paying 8%. These bonds will sell at a "Premium"

Solution 6:

Payment for the use of money is "Interest"

Solution 7:

A series of equal dollar amounts to be paid or received at evenly spaced time intervals is a "Annuity"

Solution 8:

For a single payment, present value factor for four periods at a discount rate of 11% = 0.658731

Solution 9:

For a single payment, Present value factor for sixteen periods at a discount rate of 10% = 0.217629

Solution 10:

For a single payment, present value factor for one period at a discount rate of 10% = 0.90909

Solution 11:

For an annuity, present value factor for nine periods at a discount rate of 12% = 5.32825

Solution 12:

For an annuity, present value factor for twenty periods at a discount rate of 8% = 9.818147

Solution 13:

For an annuity, present value factor for five periods at a discount rate of 8% = 3.99271