If your nominal rate of return is 14.38 percent and your real rate of return is 4.97 percent, what is the inflation rate? Fisher Effect: (1 + 0.1438) = (1 + 0.0497)(1 + h); h = 8.96 percent Bond P is a premium bond with a coupon rate of 9.5 percent. Get the latest news and analysis in the stock market today, including national and world stock market news, business news, financial news and more.
Chapter 4
Questions: 8, 17 & 18
Coupon Rates.Volbeat Corporation has bonds on the market with 10.5 years to maturity, a YTM of 8.4 percent, and a current price of $945. The bonds make semiannual payments. What must the coupon rate be on the bonds?
Bond Yields. PK Software has 7.5 percent coupon bonds on the market with 22 years to maturity. The bonds make semiannual payments and currently sell for 97 percent of par. What is the current yield on PK’s bonds? The YTM? The effective annual yield?
Interest Rate Risk. Bond J has a coupon rate of 4 percent. Bond S has a coupon rate of 14 percent. Both bonds have 10 years to maturity, make semiannual payments, and have a YTM of 8 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower-coupon bonds?
Chapter 5 (Questions 1, 4, and 12) Present Value and Multiple Cash Flows. Rooster Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18 percent? At 24 percent?
Calculating Annuity Present Values. An investment offers $6,700 per year for 15 years, with the first payment occurring 1 year from now. If the required return is 8 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever?
Calculate EAR. Find the EAR in each of the following cases.
Chapter 5 (1,4,12)
Present Value and Multiple Cash Flows. Rooster Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18 percent? At 24 percent?
Advertisements
To Download tutorialCopy and Paste below Link into your Browser
8.Coupon Rates.Volbeat Corporation has bonds on the market with10.5 years to maturity, a YTM of 8.4 percent, and a current price of $945. Thebonds make semiannual payments. What must the coupon rate be on the bonds?
18.Bond Yields. PK Software has 7.5 percent coupon bonds on themarket with 22 years to maturity. The bonds make semiannual payments andcurrently sell for 97 percent of par. What is the current yield on PK’s bonds?The YTM? The effective annual yield?
17.Interest Rate Risk. Bond J has a coupon rate of 4 percent. BondS has a coupon rate of 14 percent. Both bonds have 10 years to maturity, makesemiannual payments, and have a YTM of 8 percent. If interest rates suddenlyrise by 2 percent, what is the percentage price change of these bonds? What ifrates suddenly fall by 2 percent instead? What does this problem tell you aboutthe interest rate risk of lower-coupon bonds?
Chapter 5 (Questions1, 4, and 12) Present Value and Multiple Cash Flows. Rooster Co. has identified an investmentproject with the following cash flows. If the discount rate is 10 percent, whatis the present value of these cash flows? What is the present value at 18percent? At 24 percent?
4. Calculating Annuity Present Values. An investmentoffers $6,700 per year for 15 years, with the first payment occurring 1 yearfrom now. If the required return is 8 percent, what is the value of theinvestment? What would the value be if the payments occurred for 40 years? For75 years? Forever?
12. Calculate EAR. Find the EAR in each of thefollowing cases.
• Present Value and Multiple Cash Flows.Rooster Co. has identified an investment project with the following cash flows.If the discount rate is 10 percent, what is the present value of these cashflows? What is the present value at 18 percent? At 24 percent?