Answered: Bond has a face value of ₡3000 and pays…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a) Bond has a face value of ₡3000 and pays coupon of 12% per annum for 4 years, if the
market interest rate is 16%. How much will you pay for this bond. If the coupon was to be
paid semi- annually will your answer be different.

b) A U.S. investor obtains Ghana cedis when the cedi is worth $.33 and invests in a one-year
money market security that provides a yield (in cedis) of 24%. At the end of one year, the
investor converts the proceeds from the investment back to dollars at the prevailing spot
rate of $.26. What is the effective yield earned by this foreign investor?

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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