A fixed-interest loan bears interest at 8% per annum payable half-yearly in arrear and will be redeemed at 110% by 5 instalments, of equal nominal amount, on 30 June in each of the years 2031 to 2035 inclusive. An investor, who is liable to income tax at the rate of 30%, purchased the entire loan at a price to obtain a net yield of 7% per annum effective. If the PV of payments was 152.77, the value of the loan on 30 June 2014 for each 500 nominal is Select one: a. 89.32% b. 125.6% c. 118.4% d. 131.4% e. 105.14%

A fixed-interest loan bears interest at 8% per annum payable half-yearly in arrear and will be redeemed at 110% by 5 instalments, of equal nominal amount, on 30 June in each of the years 2031 to 2035 inclusive. An investor, who is liable to income tax at the rate of 30%, purchased the entire loan at a price to obtain a net yield of 7% per annum effective. If the PV of payments was 152.77, the value of the loan on 30 June 2014 for each 500 nominal is Select one: a. 89.32% b. 125.6% c. 118.4% d. 131.4% e. 105.14%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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