Bond stipulates fixed nominal interest rate

Assignment Help Business Economics

Reference no: EM131093159

A bond has a face value of $8000. The bond stipulates a fixed nominal interest rate of 8% per year, paid every 3 months, over its 10 year life.

a. If you were to buy this bond at a price of $7500, determine your quarterly IRR, your nominal rate of return, and your effective rate of return. Briefly describe in plain English what each of these values means. You can use Excel for the IRR calculation, but manually show your work for the nominal and IRR calculations. If you use Excel, upload your file to Moodle or email it to me.

b. Assuming the same purchase price of $7500, and a nominal MARR of 12% per year, calculate the quarterly ERR manually, and in MS Excel. Also calculate the nominal and effective ERR. Please upload your file to Moodle, or email it to me. Briefly explain in plain English what this value means, and why it differs from the IRR calculated in part “a”.

Reference no: EM131093159

Questions Cloud

How the concept and definition of art has changed : Discussion of ways that art has changed and how studying that change is essential to learning what art really is - Personal view of how the concept and definition of art has changed

Priority for a risk change as the project progresses : Describe what needs to be done to manage risk on a project. When should this be done? How can a risk assessment matrix help in this process? What risks for a project have the highest priority? Does the priority for a risk change as the project pro..

Real interest rates and real exchange rates are constant : The real interest rates and real exchange rates are constant and equal in North Country and South Country. The Fisher equation and purchasing-power parity hold in both countries. If the nominal interest rate is 8 percent in North Country and 10 perce..

A binomial distribution with parameters : We have seen that if Y has a binomial distribution with parameters n and p, then Y/n is an unbiased estimatorofp.To estimate the variance of Y,we generally usen(Y/n)(1-Y/n).

Bond stipulates fixed nominal interest rate : A bond has a face value of $8000. The bond stipulates a fixed nominal interest rate of 8% per year, paid every 3 months, over its 10 year life. If you were to buy this bond at a price of $7500, determine your quarterly IRR, your nominal rate of retur..

Write a research on evaluation of education system : Write a Research on evaluation of education system Literature review Analyzing the problem

Create a graph that illustrates your data : Create a graph that illustrates your data. This may be a pie or bar graph or may be a histogram or box plot, depending on the nature of your data.

Should the government invest in the excavating equipment : The government is considering purchasing some excavating equipment. It has a first cost of $65,000, will result in annual savings to the public of $20,000 per year, and will be sold for $15,000 at the end of its useful life. The useful life is 5 year..

Capital account inflow or capital account outflow : Each of the following events will result in either an import or export to be recorded in the current account or the capital account of Vidinland, an imaginary small country in eastern Europe. For each one, say whether it will be a current account imp..

User Account

All Pages