Question
In: Finance
You will receive $100 from a zero-coupon savings bond in 3 years. The nominal interest rate...
You will receive $100 from a zero-coupon savings bond in 3 years. The nominal interest rate is 7.20%.
a. What is the present value of the proceeds from the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. If the inflation rate over the next few years is expected to be 2.20%, what will the real value of the $100 payoff be in terms of today’s dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. What is the real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
d. Show that the real payoff from the bond [from part (b)] discounted at the real interest rate [from part (c)] gives the same present value for the bond as you found in part (a). (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Solutions
jeff jeffy answered 1 year agoRelated Solutions
You will receive $100 from a zero-coupon savings bond in 4 years. The nominal interest rate...
You will receive $100 from a zero-coupon savings bond in 4
years. The nominal interest rate is 8.80%.
a. What is the present value of the proceeds
from the bond?
b. If the inflation rate over the next few
years is expected to be 3.80%, what will the real value of the $100
payoff be in terms of today’s dollars?
c. What is the real interest rate?
Suppose that you purchase a $1,000 zero-coupon bond that matures 3 years from now and is...
Suppose that you purchase a $1,000 zero-coupon bond that matures
3 years from now and is priced to yield 4.5%., Assume interest is
compounded semi-annually.
a. How much will you pay for the bond with exactly 3 years to
maturity?
b. One year later, if interest rates remain the same, what will
be the price of the bond?
c. If you paid $850 for the bond with 3 years to maturity, and
held it until maturity, what will be your...
1).Consider a zero coupon bond with 10 years maturity with face value $100. The internal rate...
1).Consider a zero coupon bond with 10 years maturity with face
value $100. The internal rate of return (IRR, y) is 8% and the
daily volatility of the IRR is 0.0007 (7 basis points). Required: •
Compute the percentage VaR over 1-day and under 99% confidence
level. • Compute the dollar VaR over 1-day and under 99% confidence
level.
2).Consider the risk of a short position on a call option. The
VaR of its underlying asset is 2000. The delta...
You receive a $25,000 car LEASE at 6% nominal annual for 3 years. Interest is compounded...
You receive a $25,000 car LEASE at 6% nominal annual for 3
years. Interest is compounded monthly and you make monthly
payments. Your Residual value at the end of your lease is $15,000.
Assume LEASE payments are made at the END of the month, (first
payment due end of first month). You can also get a LOAN for the
same terms (although you will pay off the entire car in 3
years).
Assume your MARR for investment is 4% annual...
You receive a $25,000 car LEASE at 6% nominal annual for 3 years. Interest is compounded...
You receive a $25,000 car LEASE at 6% nominal annual for 3
years. Interest is compounded monthly and you make monthly
payments. Your Residual value at the end of your lease is $15,000.
Assume LEASE payments are made at the END of the month, (first
payment due end of first month). You can also get a LOAN for the
same terms (although you will pay off the entire car in 3
years).
Assume your MARR for investment is 4% annual...
Bond T is a coupon bond with a coupon rate of 2% maturing in 3 years....
Bond T is a coupon bond with a coupon rate of 2% maturing in 3
years. The bond pays coupon annually, and has a face value of
$100.15. What is the Macaulay duration of the coupon bond
Calculate the price of a zero-coupon bond that matures in 13 years if the market interest...
Calculate the price of a zero-coupon bond that matures in 13
years if the market interest rate is 6.15 percent. Assume
semiannual compounding. (Do not round intermediate
calculations and round your final answer to 2 decimal
places.)
Treasury note
Corporate bond
Municipal bond
Calculate the price of a zero-coupon bond that matures in 23 years if the market interest...
Calculate the price of a zero-coupon bond that matures in 23
years if the market interest rate is 4.2 percent. Assume semiannual
compounding
A zero-coupon bond has a principal of $100 and matures in four years. The market price...
A zero-coupon bond has a principal of $100 and matures in four
years. The market price for the bond is $72. Calculate the yield to
maturity, duration and convexity of the bond.
(Please provide a well detailed answer with the equations that
are being used. Thank you!)
You deposit into a savings account 3 years ago, and earned interest at an annual rate...
You
deposit into a savings account 3 years ago, and earned interest at
an annual rate of eight percent. The deposit accumulated to 30,000.
How much was initially deposited assuming that the interest was
compounded a. annually b. semiannually c. quarterly
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Consider a buffer system consisting of Benzoic acid (pKa = 4.20) and sodium benzoate, a) Would...
- Decision Variables S T Minimize 1.8S + 2.20T Subject to: Potassium 5S + 8T >= 200...
- A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,...
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
ADVERTISEMENT