ally purchase a discount bond today for a price of $3333. the bond promises a cash flow of $5550 in 5 years . ally holds the bonds for one year and sells it . when she sells it the interest rate is at 6 % . in this case what is one year rate of return for ally ?

ally purchase a discount bond today for a price of $3333. the bond promises a cash flow of $5550 in 5 years . ally holds the bonds for one year and sells it . when she sells it the interest rate is at 6 % . in this case what is one year rate of return for ally ?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 18P

See similar textbooks

Related questions

Q: 8. Frank invests $1500 in a bond that pays 6.5% per year compounded annually. How much money will he…

A: Investment amount = $ 1500 Annual interest rate = 6.5% Period = 6 Years

Q: Adam purchases a retirement annuity that will pay him $1,500 at the end of every six months for the…

A: Semi Annual Payment $ 1,500.00 Time Period (years) 8 Interest rate 4% Monthly…

Q: Scofield purchased a bond, costing 890, three years ago, with a current price of 925. This bond paid…

A: Yearly Interest Payments (Coupon) = 100 Time Period for Holding (N) = 4 years Price of Bond at end…

Q: Present value (with changing years). When they are first born, Grandma gives each of her…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: x bought a securities a year ago by means of a cash payment of 5,000,000 and 2,500,000 / year for…

A: Given:Security bought one year ago.Cash payment=5000000+2500000=7500000Total time period is 5…

Q: What will the remaining balance on their mortgage be after 5 years?

A: Mortgage: It is referred to as credit or loan used by the borrower to buy a house, land, or other…

Q: Diego plans to invest $500 per month in their tax-free savings account for the next four years.…

A: In the given question, $ 500 is invested at the end of each month for 4 years at 8% per annum.…

Q: if Marwa has a 1,00,000 bond with a 7% interest , how much will she has in 8 years.

A: Given: Present value = 1,000,000 Interest rate = 7% Year =8

Q: Diego is getting a mortgage for $320,000 at a rate of 4.5% for 30 years. What is his monthly payment…

A: Monthly Payment is the payment that is to be paid monthly for a specific period of time to repay the…

Q: Emily purchased a bond valued at $10,000 for highway construction for $4,410. If the bond pays 6.4%…

A: Using excel NPER function

Q: Selina purchases a 5-year CD for $1,000 and a $1,000 municipal bond. The CD has a 2% interest rate…

A: Bond is a debt security that is issued by organizations to raise debt funds from investors in…

Q: Mildred can purchase a municipal bond with a par (face) value of $1000 that will mature in 10 years.…

A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…

Q: 4. An investor has P 70,000 and places part of it in bonds paying 12% interest per year and the rest…

A: We need to use simple interest formula Simple interest =principal*rate *time

Q: Keith invested in a savings bond for 3 years and was paid simple interest at an annual rate of 2%.…

A: Time Period = N = 3 years Interest rate = 2% Simple Interest = 120

Q: A man is offered two proposals to invest his money. The first offer is to invest $ 20,000 in the…

A: We need to calculate future value of both investments. Higher future value proposal will be chosen…

Q: Marie Snell recently inherited some bonds (face value R100 000) from her father, and soon thereafter…

A: Here, Face Value of Bond is R100,000 Coupon Rate is 2% Therefore, Coupon Payment is :…

Q: A child’s grandparents are considering buying a $80,000 face-value, zero-coupon bond at birth so…

A: In this question present value is to be find out. Present value is the value of an asset in today’s…

Q: Susan spends $139,680 on new Gingo Corporation bonds worth $155,200. The bonds carry a $15,520…

A: A loan is a buy of an asset or thing the with goal of producing revenue or rising in value. When…

Q: Sunni bought a $500 corporate bond. The bond pays 4.8% interest per year. If Sunni holds the bond…

A: Interest is the monetary amount charged for money borrowed, generally the rate of interest expressed…

Q: Maya has savings of $50,000. She invests in a bond mutual fund that 4% interest each year. Ignoring…

A: Total savings are the accumulated value of the investment including interest. In case of simple…

Q: Marcie has some extra money that she wants to place into a relatively safe investment. Her employer…

A: Coupon payment can be calculated by multiplying the face value of the bond with the coupon rate P/A…

Q: Emily purchaseda bond valued at $10,000 for highway construction for $4,540. IT the bond pays 7.9%…

A: Face Value = 10,000 Present Value (Price) = 4540 Monthly Compounding Interest % = 7.9%/12 = 0.6583%…

Q: Esther needs to pay rent in 5 payments of $2,000. Payments are made annually with the first payment…

A: A fixed instrument that is issued by the company in order to raise the finance, where the fixed rate…

Q: Assume bonds payable are amortized using the straight-line amortization method unless stated…

A: Future value: This is the amount of present value accumulated or compounded at a rate of interest…

Q: Alfred Smith wants to purchase life insurance that will guarantee his family $50,000 (in R-dollars)…

A: Given information: Amount of insurance is $50,000 Interest rate on corporate bonds is 8% Inflation…

Q: Eren purchased a bond, costing 890, three years ago, with a current price of 925. This bond paid 100…

A: Price of bond =Present value of value after 4 years +Present value of coupon payment.

Q: Joan purchases a 30-year federal government bond for $10,000 that pays 4 percent annual interest.…

A: Bonds are debt securities issued by Government or other companies, who seek to raise money from…

Q: Leann just sold a $10,000 par value bond for $9,800. The bond interest rate was 5.5% per year…

A: In order to calculate the purchase price of the bond, we are required to discount the probable cash…

Q: John purchased a $20,000 20-year bond at a 2% dis- count. It pays semiannually at a rate of 4% per…

A: In case of bond interest is payable annually, semi annually as per initially agreed, but it is…

Q: By the end of this year you would be 35 years old and you want to plan for your retirement. You wish…

A: Retirement account interest = 7% Period of retirement account = 30 years Annual coupon = 6% Annuity…

Q: Kate Eden received a graduation present of $2,000 that she is planning on investing in a mutual fund…

A: Excel Spreadsheet:

Q: Mr. Arturo bought a bond having a face value of Php3500 for Php3300. The bond rate was 16% nominal…

A: Selling price of an investment is that price at which bond or an investment is being sold by a…

Q: Mary just purchased a bond which pays $60 a year in interest. What is this $60 called?

A: In this case mary has purchased a bond which pays $60 a year in interest. We need to tell what this…

Q: Sarah secured a bank loan of $180,000 for the purchase of a house. The mortgage is to be amortized…

A: We will use this formula for calculation of monthly mortgage payment of loan. Monthly payment of…

Q: Emily purchased a bond valued at $10,000 for highway construction for $4,540. If the bond pays 7.9%…

A: This is the question of TIME VALUE OF MONEY. According to TIME VALUE OF MONEY, FV=PV×1+Rmm×t where,…

Q: Ama purchased a 1-year Treasury Bill on 1st July 2016. The Bill has a face value of GHC200,000 and a…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Ms. Jones wants to make 8% nominal interest compounded quarterly on a bond investment. She has an…

A: Given information: Nominal interest rate is 8% Par value of bond is $10,000 Number of periods is 15…

Q: David owns $30,000 worth of 10-year bonds of Ace Corporation. These bonds pay interest every 6…

A: Bond is a debt instrument which provides fixed interest payment quarterly, half-yearly or annually.

Q: Emily purchased a bond valued at $10,000 for highway construction for $4,540. If the bond pays 7.9%…

A: A bond is a debt instrument that is issued by the organization top raise the funds from the investor…

Q: Your rich uncle has just given you a high school graduation present of $1,300,000. The present,…

A: We need to use the concept of time value of money to solve the question. According to the concept of…

Q: Stephanie purchases a retirement annuity that will pay her $3,000 at the end of every six months for…

A: formula for annuity PVA=A×1-11+rmn×mrm where, r=rate of interest m =frequency of compounding A=…

Q: bonds sell for in the marke

A: 1) Formula to calculate the amount is: Value of the bond = [coupon((1-(1+r/2)^2n)r/2)] + Face…

Q: By the end of this year you would be 35 years old and you want to plan for your retirement. You wish…

A: Annuity is the number of payments of an equal amount and is made at an equal interval of time. At…

Q: By the end of this year you would be 35 years old and you want to plan for your retirement. You wish…

A: Retirement account is the account in which deposits are made by the individual during the years of…

Q: ames purchased a bond for $3380 that had a rate compounded annually, 2 years later he sold it for…

A: Compound Interest is calculated by multiplying the initial principal amount by one plus the annual…

Q: Rejean purchased a 20-year 6 percent real return bond for $15 000 and the CPI has increased by 1.5…

A: To calculate the Interest, first we should calculate the Inflation adjusted face value and coupon of…

Question

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Concepts

VIEW

Response

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Isabel purchases a 10-year, 5 percent savings bond with a face value of $1,000 by paying a premium for $1,100. She gets the dividend paid yearly. Determine the rate of return she gets on the bond assuming she keeps the bond till maturity.
Mildred can purchase a municipal bond with a par (face) value of $1000 that will mature in 10 years. The bond pays 6% interest compounded quarterly. If she can buy this bond for $1050, what rate of return will she earn?
Selina purchases a 5-year CD for $1,000 and a $1,000 municipal bond. The CD has a 2% interest rate APR compounded quarterly and a fine of $50 for early withdrawal. The bond has a coupon rate of 9%, paid annually. After 3 years, Selina comes into a financial crisis. A friend offers to buy her bond for $1000 to help her make ends meet. Is it a better choice for Selina to cash in her CD early or to sell her bond? Hint: Which choice will lead to a larger net gain at the end of the investment? A. Cash CD early. B.Sell her Bond.
Eight years ago, Natalia purchased an 8.25% $1,000 bond for 107 1/2 plus brokerage fees totaling $28. Natalia received interest checks semiannually. Immediately after receiving her 16th interest check, she sold the bond for 114 less brokerage fees totaling $55. Calculate Natalia's rate of return.
Ms. Jones wants to make 8% nominal interest compounded quarterly on a bond investment. She has an opportunity to purchase a 6%, $10,000 bond that will mature in 16 years and pays quarterly interest. This means that she will receive quarterly interest payments on the face value of the bond ($10,000) at 6% nominal interest. After 16 years she will receive the face value of the bond. How much should she be willing to pay for the bond today?
Marcie has some extra money that she wants to place into a relatively safe investment. Her employer is offering to employees a generous 5% discount for 10-year $5,000 bonds that carry a coupon rate of 6% paid semiannually. The expectation is to match her return on other safe investments, which have averaged 6.7% per year compounded semiannually. (This is an effective rate of 6.81% per year.) Should she buy the bond?
if Marwa has a 1,00,000 bond with a 7% interest , how much will she has in 8 years.
David owns $30,000 worth of 10-year bonds of Ace Corporation. These bonds pay interest every 6 months at the rate of 3%/year (simple interest). How much income will David receive from this investment every 6 months? $ How much interest will David receive over the life of the bonds? $
James purchased a bond for $3380 that had a rate compounded annually, 2 years later he sold it for $3700. What interest rate, compounded annually, did James earn on this investment? 4.32% 4.73% 4.63% 0.96%
Marie Snell recently inherited some bonds (face value R100 000) from her father, and soon thereafter she became engaged to Sam Spade, a University of Florida marketing graduate. Sam wants Marie to cash in the bonds so the two of them can use the money to "live like royalty" for two years in Monte Carlo. The 2 percent annual coupon bonds mature on January 1, 2024, and it is now January 1, 2004. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 12 percent. If Marie sells her bonds now and puts the proceeds into an account which pays 10 percent compounded annually, what would be the largest equalannual amounts she could withdraw for two years, beginning today?2.6 Recently, Midrand Hospitals Inc. filed for bankruptcy. The firm wasreorganized as American Hospitals Inc., and the court permitted a new indenture on an outstanding bond issue to be put into effect. The issue has 10 years to…
Marie Snell recently inherited some bonds (face value R100 000) from her father, and soon thereafter she became engaged to Sam Spade, a University of Florida marketing graduate. Sam wants Marie to cash in the bonds so the two of them can use the money to "live like royalty" for two years in Monte Carlo. The 2 percent annual coupon bonds mature on January 1, 2024, and it is now January 1, 2004. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 12 percent. If Marie sells her bonds now and puts the proceeds into an account which pays 10 percent compounded annually, what would be the largest equal annual amounts she could withdraw for two years, beginning today?
Isona has owned a $10,000, 10-year bond for 4 years and is considering selling it. If it has a bond rate of 4% annually, Isona paid $9,100 for it originally, and she wants an 9% annual yield, how much should she charge for the bond?