Question

16.

a. Keenan Industries has a bond outstanding with an 8.25% coupon, payable semiannually, and a $1,000 par value. The bond's dollar price is $1,066.00 and the bond is callable at 104. The bond's yield to call is 7.41 percent. When can the bond be called (round to the nearest whole year)?

b. You turn 35 today, and you plan to save $2,000 each month for retirement, with the first deposit made at the end of this month. You plan to retire 30 years from today, when you turn 65, but you're not sure how long you can expect to live after retirement, so you want the payments to go on forever. Under these assumptions, how much can you spend each month after you retire? Your first withdrawal will be made at the end of the first month of retirement.

c. You agree to make 36 deposits of $750 at the end of each month into a bank account. At the end of the 36th month, you will have $30,000 in your account. If the bank compounds interest monthly, what nominal annual interest rate will you be earning?

You will invest in a mutual fund that's expected to provide a return of 4.5% per year, compounded monthly throughout your life.

Answer 1