Assume you will be paying $10,000 per year in tuition expenses at the end of each of the next two years. Bonds currently yield 8%. a) What is the present value and duration of your obligation? b) What maturity zero-coupon bond would immunize your obligation? c) Suppose you buy a zero-coupon bond with value and duration equal to that of your obligation. Now suppose that interest rates immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation?

Q: Suppose you purchase a zero coupon bond with face value $1,000, maturing in 25 years, for $180. What…

A: Yield to maturity can be calculated by following function in excel =RATE (nper, pmt, pv, [fv],…

Q: You are considering investing in a bond that matures 20 years from now (the par value of the bond is…

A: Time Period = 20 Years Par Value = $1,000 Coupon Rate = 9.65% or Coupon Value = $96.5 Current Value…

Q: The bond will pay you $100 at the end of each year for three years. At the end of the third year,…

A: Present value (PV) is the current value of a future sum of money or stream of cash flows given a…

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A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…

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A: Lets understand the basics. When market rate of interest rate is same as bond interest rate then…

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A: Future Value = 7000 N = 10 Rate = 6%

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A: Issue price of the debenture = Present value of principal + Present value of interest payments…

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A: GIVEN, par = $1000 coupon rate = 8.5% m =2 ( semi annual) n = 5 r = 12%

Q: Quinn purchases a bond for $29,000 when the market interest rate is 13% per year, compounded…

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

Q: Shannon purchases a bond for $952.00. The bond matures in 3 years, and Shannon will redeem it at its…

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

Q: You have an opportunity to purchase a bond that will pay out $815 in 10 months. If you would like…

A: Payout in 10 months = $ 815 Interest rate = 2.2% Period = 10 months

Q: You plan to invest in bonds that pay 3.25%, compounded annually. If you invest $10,000 today, how…

A: Given: Interest rate is 3.25% Present value $10,000 Future value = $30,000 Number of years =?

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A: Annual cash inflow = $ 1500 Maturity value = $ 2000 Years to maturity = 5 Years Annual interest rate…

Q: Jimmy has a bond with a $1,000 face value and a coupon rate of 9.5% paid semiannually. It has a…

A: Present Value is defined as the current value of the future stream of the funds or the cash flows,…

Q: You have decided to buy a perpetual bond. The bond makes one payment at the end of every year…

A: Given: Interest rate = 9% Initial cost = $3,000

Q: Stacy purchases a $60,000 bond for $57,500. The coupon rate is 6% per year payable quarterly. The…

A: The present worth of the bond will be the present value of the coupon and principal payments.

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A: Rate of return earned is the annual return on investment realized.

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

Q: What total cash will you receive from the bond after the 3 years? Assume that periodic cash flows…

A: The Question asked about what will the total price, received after 3 years when a person who buys it…

Q: You have decided to buy a perpetual bond. The bond makes one payment at the end of every year…

A: To calculate the payment at the end of each we will use below formula   Annual payment = PV*r Where…

Q: A man wants to make 14% nominal interest compounded semi - annually on a bond investment. How much…

A: Here we asked to find the bond price given a specific yield (14%). We can do this by using the time…

Q: Suppose Roberto is considering a 12-year bond with a face value of $2,000 and a rate of 8% payable…

A: Face value = $ 2,000 Coupon rate = 8% Semi annual coupon amount = 2000*0.08/2 = $ 80 Years to…

Q: You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months.…

A: Bonds are the liabilities of the company which is issued to raise the funds required to finance the…

Q: Assume that you wish to purchase a 20-year bond that has a maturity value of P1,000 and makes…

A: Bond price is the function of cash flows associated with it. To find the bond price, all the cash…

Q: You buy a bond that pays annual interest payments of 7% of the bond’s face value of $1000. You…

A: Rate of return is the percentage of profit earned from an investment. Given: Face value of bond is…

Q: You will be paying $10,000 a year in tuition expenses at the end of the next two years. Bonds…

A: a) The computation of duration of obligation: Hence the duration of obligation is 1.4808. and…

Q: You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months.…

A: The price of the bond shall be the present value of face value of the bond and semi annual coupons…

Q: An investor is considering buying a 20-year corporate bond. The bond has a face value of $1000 and…

A: Corporate bond-It is a bond issued by a company to fund its business operations, major expansions,…

Q: Mike is interested in purchasing a bond that matures in 15 years, pays a 9.0% coupon semiannually…

A: Assuming Face Value = 1000 Semi Annual Compounding, Time Period = 15 years * 2 = 30 semi annual…

Q: Suppose you purchased a corporate bond with a 10-year maturity, a $1,000 par value, a 10% coupon…

A: Given: Particular  Value Par Value 1000 Time to maturity 14 Coupon rate 10%

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A: A bond is a financial security that generates periodic coupon payments at a predetermined rate on…

Q: (a) How much should an investor pay for a $1,000 ARA Corporation bond?  (b) Discuss reasons why an…

A: Bond: It is a debt instrument issued by the company for raising debt capital.  Hence the bond holder…

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A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: You have just purchased 10 municipal bonds, each with a $1,000 par value, for $9,500. You purchased…

A: Investor sells the bond after 5 years. Hence, the investor will receive the coupon payment for those…

Q: Jimmy has a bond with a $1,000 face value and a coupon rate of 8.25% paid semiannually. It has a…

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Q: Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes…

A: Using excel PV function

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Q: Assume the investor's minimum acceptable rate of return is 5% per year compounded semiannually. What…

A: Semi Annual Compounding Face Value = 20,000 Time Period (N) =  25 years i.e. 50 semi annual periods…

Q: suppose you own a 40-year bond that has a bond rate of 2% per year. 1. How much money will you lose…

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

Q: Suppose you are deciding whether to buy a particular bond. If you buy the bond and hold it for 9…

A: Answer: Calculation of the present value of the payment of $8,981, if the interest rate is 4%:…

Q: Diane Carter is interested in buying a five-year zero coupon bond whose face value is $1,000. She…

A: We are given following details in the question : Face value = $1000 Market interest rate = 9% Time…

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A: Computation of bond price Table values are based on: n= 20     i= 5.00%     Cash flow Table…

Q: You buy a zero coupon bond at the beginning of the year that has a face value of $1,000, a YTM of 13…

A: Implied interest should be taxable and needs to be declare on your tax return.

Q: You are considering purchasing a 15-year bond for $2400. If the coupon rate is 5.6% APR paid…

A: Total interest during the life of bonds = Principal value * Interest rate * Years