EBK BASICS OF ENGINEERING ECONOMY
EBK BASICS OF ENGINEERING ECONOMY
2nd Edition
ISBN: 8220100255052
Author: Blank
Publisher: MCG
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Chapter 6, Problem 20P
To determine

Calculate the rate of return.

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Q10. A mortgage bond issued by Automation Engineering is for sale for $9,000. The bond has a face value of $10,000 with a coupon rate of 9% per year, payable semi-annually. What rate of return will be realized if the purchaser holds the bond to maturity 7 years from now?       The rate of return will be % per year.
Aloma, a university graduate who started a successful business, wants to start an endowment in her name that will provide scholarships to IE students. She wants the scholarship to provide $10,000 per year and expects the first one to be awarded on the day she fulfills the endowment obligation. If Aloma plans to donate $100,000, what rate of return must the university realize in order to award the $10,000 per year scholarship forever?
During recessionary periods, bonds that were issued many years ago have a higher coupon rate than currently issued bonds. Therefore, they may sell at a premium, a price higher than their face value, because of currently low coupon rates. A $50,000 bond that was issued 15 years ago is for sale for $60,000. What rate of return per year will a purchaser make if the bond coupon rate is 14% per year, payable annually, and the bond is due 5 years from now? Write the ROR equation and use a single-cell spreadsheet function to display the correct answer directly.

Chapter 6 Solutions

EBK BASICS OF ENGINEERING ECONOMY

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