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- Suppose that you purchase a 2 year coupon bond at the time it is issued for $1100. The face value of the bond is $1000, with annual coupon payments of $80. a. What is the bond’s “coupon rate”? b. What is the bond’s “current yield”? c. What is the bond’s (nominal) “yield to maturity”? d. If you hold the bond for 1 year and sell it for $1035 (after collecting the first coupon payment), what is your “holding period rate of return”? Please answer all part otherwise DounvoteGive typing answer with explanation and conclusion Gustav Co. is planning to issue new 30-year bonds. The current plan is to make the bonds non-callable, but this may be changed. If the bonds are made callable after 5 years at a 5% call premium, how would this affect their required rate of return? Question 6 options: There is no reason to expect a change in the required rate of return. The required rate of return would increase because the bond would then be?Suppose you pay $971 for a 10=year Treasury bond that has a face value of $1,000 and a coupon rate of 5%. If you sell the bond one year later for $1,013, what is your one-year rate of return? (Give your answer as a percentage, round your answer to two decimal places; e.g., 4.37 for 4.37%)
- What is the present value of $1.21 received at the end of two years if the interest rate is 10% and compounding is annual? a- 1.31 b- 1.21 c- 1.10 d- 1.00 Which of the following is a leading economic indicator? a- average prime interest rate charged by banks b- stock prices, 500 common stocks c- commercial and industrial loans outstanding d- industrial productionSuppose Crystal Wilson wants to accumulate $1,000,000 by the time she retires in 40 years. If she earns 10% on her investments, how much must she invest each year in order to realize her goal?Assume the interest rate is 7%, What is the present value of $200: 1 year from now? 186.92 5 years from now? 142.60 10 years from now? 101.67
- 2. Calculate the value of P corresponding to the following series, if the effective interest rate applicable to each period is 10%:Suppose Ted deposits $10,000 in a savings plan earning 5% compounded annually and Tess deposits $10,000 ina savings plan earning 10% compounded annually. Both leave their money on deposit for 40 years. Because Tess’srate is twice as great as Ted’s rate, is it true that Tess will earn twice as much interest? Explain why or why not.Then show calculations to prove your point of view. What is the future value for each investment? N i PV PMT FV 5 10Suppose that you, on 1st of January 2023, enter a long position in a 10-year forward contract on a non-dividend-paying stock. The stock price is $50 and the risk-free rate of interest is 5% per annum with yearly compounding (as per 1st of January 2023). a) What are the forward price and the initial value of the forward contract? Five years later, 1st of January 2028, the price of the stock is $60 and the risk-free interest is still 5%. b) On 1st of January 2028, what are the forward price and the value of the forward contract that you entered into on 1st of January 2023? Explain. c) Suppose that you on 1st of January 2028 enter a short position in a forward contract on the same underlying stock and with expiration date in 5 years. What is the value of your total position? (I.e. what is the total value of the long position in the forward contract in a) and your short position). What is the payoff of your total position at maturity? d) On 1st of January 2028, what is the value…
- Today, you invest ₱100,000 into a fund that pays 25% interest compounded annually. Three years later, you borrow ₱50,000 from a bank at 20% annual interest and invest in the fund. Two years later, you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal you start taking ₱20,000 per year out of the fund. After five withdrawals, you withdraw the balance in the fund. How much was withdrawn? Note: Draw the cashflow diagramToday, you invest ₱100,000 into a fund that pays 25% interest compounded annually. Three years later, you borrow ₱50,000 from a bank at 20% annual interest and invest in the fund. Two years later, you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal you start taking ₱20,000 per year out of the fund. After five withdrawals, you withdraw the balance in the fund. How much was withdrawn? Note: Draw the cashflow diagram and solve using the formula of annuities1. Suppose that $100 is invested for five years at an interest rate of 8% per year, compounded annually. How much will be in the account at the end of five years? 2. Suppose that an investor wishes to deposit an amount now so that in 30 years $1,000,000 will be in an account that pays 10% interest per year, compounded annually. What amount must be deposited now? 3. How many years are required for an investment to double in value at 10% interest? 4. Suppose that an investor wishes to deposit an amount now so that in 20 years there will be $50,000 in an account that pays 7% interest, compounded annually. What amount must be deposited now?
