Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 37, Problem 2P
To determine
Present value of an investment.
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Q3)
(For the first 20 bond problems, assume interest payments are on an annual basis.)
Bond value (LO10-3) The Lone Star Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 20 years. Compute the current price of the bonds if the present yield to maturity is
6 percent.
9 percent.
Suppose that you are obtaining a personal loan from your uncle in the amount of $20,000 (now) to be repaid in two years to cover some of your college expenses. If your uncle usually earns minimum 8% profit (annually) on his money, which is invested in various sources.
1) What minimum lump-sum payment two years from now would make your uncle happy?
2) If you pay yearly, how much should you pay each year?
3) If you pay every six months, how much should you pay every six months?
How much would you pay for a perpetual bond that pays an annual coupon of $200 per year and yields on competing instruments are 5%?
You would pay $.
(Round your response to the nearest penny.)
Part 2
If competing yields are expected to change to 8%, what is the current yield on this same bond assuming that you paid $4,000?
The current yield is %.(Round your response to the nearest integer.)
Part 3
If you sell this bond in exactly one year, having paid $4,000, and received exactly one coupon payment, what is your total return if competing yields are 8%?
Your total return is %.
Chapter 37 Solutions
Economics (Irwin Economics)
Ch. 37 - Prob. 1DQCh. 37 - Prob. 2DQCh. 37 - Prob. 3DQCh. 37 - Prob. 4DQCh. 37 - Prob. 5DQCh. 37 - Prob. 6DQCh. 37 - Prob. 7DQCh. 37 - Prob. 8DQCh. 37 - Prob. 9DQCh. 37 - Prob. 10DQ
Ch. 37 - Prob. 11DQCh. 37 - Prob. 12DQCh. 37 - Prob. 1RQCh. 37 - Prob. 2RQCh. 37 - Prob. 3RQCh. 37 - Prob. 4RQCh. 37 - Prob. 5RQCh. 37 - Prob. 6RQCh. 37 - Prob. 7RQCh. 37 - Prob. 8RQCh. 37 - Prob. 9RQCh. 37 - Prob. 10RQCh. 37 - Prob. 1PCh. 37 - Prob. 2PCh. 37 - Prob. 3PCh. 37 - Prob. 4PCh. 37 - Prob. 5PCh. 37 - Prob. 6P
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