In: Finance

PLEASE SHOW ALL WORKING

For dollar amounts, give your answer to the nearest cent. For interest rates, give our answer as a percentage rounded to 2 decimal places. If any parts of the question use values from earlier parts, use the EXACT values from earlier parts.

QUESTION START

a) Describe the key feature of a zero-coupon bond. (1 mark)

b) “The price of a zero coupon bond should be equal to its face value.” True or false? Explain.

c) “The yield to maturity of a discount bond is greater than its coupon rate.” True or false? Explain.

d) You just purchased a 12-year semi-annual coupon bond with a par value of $1,000 and a coupon rate of 7%. The nominal yield to maturity is 6% per annum. Calculate the market price of the bond.

e) Three years later, immediately after receiving the sixth coupon payment, you sell the bond to your best friend. Your best friend’s nominal yield to maturity is 8% per annum. Calculate the price paid by your best friend.

1.

The bond does not pay any cash flows before maturity i.e, no
coupons/interest payments only face value is paid that too at the
time of maturity

2.

False, as present value of face value will be less than face
value

Present value=Future Value/(1+rate)^t

3.

True, as a bond trades at discount when coupon rate is less than
yield or yield is greater than coupon rate

4.

Present value of coupons=Coupon rate*Par value/yield*(1-1/(1+yield/2)^(2*n))=1000*7%/6%*(1-1/1.03^24)=592.7439743

Present value of face value=Par
value/(1+yield/2)^(2*n)=1000/1.03^24=491.9337363

Price=Present Value of coupons+Present value of face
value=592.7439743+491.9337363

=1084.677711

5.

Present value of coupons=Coupon rate*Par value/yield*(1-1/(1+yield/2)^(2*n))=1000*7%/8%*(1-1/1.04^18)=443.0753941

Present value of face value=Par
value/(1+yield/2)^(2*n)=1000/1.04^18=493.628121

Price=Present Value of coupons+Present value of face
value=443.0753941+493.628121

=936.7035151

For dollar amounts, give your answer to the nearest cent. For
interest rates, give our answer as a percentage rounded to 2
decimal places.
If any parts of the question use values from earlier parts, use the
EXACT values from earlier parts.
a) Explain the relationship between the yield to maturity of a
premium bond and its coupon rate.
b) ABC Ltd issues two different bonds with the same yield to
maturity:
a 20-year zero coupon bond
a 15-year semi-annual...

For dollar amounts, give your answer to the nearest cent. For
interest rates, give our answer as a percentage rounded to 2
decimal places.
If any parts of the question use values from earlier parts, use
the EXACT values from earlier parts.
QUESTION START
You are buying a car at a cost of $42,000 by taking a loan. The
nominal interest rate is 9% per annum compounded monthly. The bank
offers 2 options for the structure of the repayments.
Option...

For the answers to this question, round dollar figures to the
nearest dollar and show all percents to two decimal points. Set up
a skeletal statement using the following figures: Net sales
$286,800 Gross margin $145,121 Profit 2.80%

Report bond prices to the nearest .01, dollar amounts to the
nearest dollar, and returns or yields to the nearest basis point.
You do not need to express bond prices in 1/32nd
format.
You are considering purchasing a newly issued annual coupon
bond with 3 years to maturity on the settlement date. The bond pays
a coupon of 8% and will be priced with a yield-to-maturity of 5%,
and you will purchase $10,000,000 par value.
What is the quoted price...

Journalize the transactions (explanations are not required).
(Round all amounts to the nearest cent. Record debits first, then
credits. Exclude explanations from journal entries.)
Trevor Publishing completed the following transactions during
2016
Oct 1 Sold a six-month subscription (starting on
November 1), collecting cash of $390 , plus sales tax of 4 %
Nov 15 Remitted (paid) the sales tax to the state of
Tennessee.
Dec 31 Made the necessary adjustment at year-end to record the
amount of subscription revenue...

For all payroll calculations, use the following tax rates and
round amounts to the nearest cent:
Employee:
OASDI:
6.2%
on first
$132,900
earned; Medicare:
1.45%
up to
$200,000,
2.35%
on earnings above
$200,000.
Employer:
OASDI:
6.2%
on first
$132,900
earned; Medicare:
1.45%;
FUTA:
0.6%
on first
$7,000
earned; SUTA:
5.4%
on first
$7,000
earned.
Robinson
works at College of
Boston
and is paid
$30
per hour for a 40-hour workweek and time-and-a-half for hours
above 40.
For all payroll calculations,...

Please round to the nearest cent for all
answers.
---------------------------------------------------------------------------------
Compare the monthly payment and total payment for the following
pairs of loan options. Assume that both loans are fixed rate and
have the same closing costs.
You need a $160,000 loan.
Option 1: a 30-year loan at an APR of 7.25%.
Option 2: a 15-year loan at an APR of 6.8%.
----------------------------------------------------------------
Find the monthly payment for each option.
The monthly payment for option 1
iswhat.
The monthly payment...

PLEASE ROUND TO THE NEAREST CENT FOR FINAL
ANSWER
Compare the monthly payments and total loan costs for the
following pairs of loan options. Assume that both loans are fixed
rate and have the same closing costs.
You need a $130,000 loan.
Option 1: a 30-year loan at an APR of 9.5%.
Option 2: a 15-year loan at an APR of 8.5%.
--------------------------------------------------------------------
1.) Find the monthly payment for each option.
The monthly payment for option 1 is what?
The...

Find the present value PV of the given investment.
(Round your answer to the nearest cent.)
An investment earns 3% per year and is worth $80,000 after 8
years.
PV=

Calculate the present value of the annuity. (round your answer to
the nearest cent.)
$1800 monthly at 6.1% for 30 years.
Determine the payment to amortize the debt. (round your answer
to the nearest cent.)
Monthly payments on $170,000 at 3% for 25 years.

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