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Briefly discuss time value of money concept

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Reference no: EM132906543

1. Suppose Abdulrahman Plan to borrow a loan of SAR 120,000 now and will repay it in 10 equal annual installments. If the bank charges 10% interest, What will be the amount of the annual installment?

2. Briefly discuss the Time Value of Money concept?

3. Ahmed has been offered a 10-year bond issued by Homer, Inc., at a price of $800. The bond has a coupon rate of 7 percent and pays the coupon semiannually. Similar bonds in the market will yield 10 percent today.

- What should be the price of this bond?

- Should Ahmed buy the bonds at the offered price?

3. Suppose a 3 year bond with a 6% coupon rate that was purchased for $760 and had a promised yield of 8%. Suppose that interest rates increased and the price of the bond declined. Displeased, you sold the bond for 798.8 after having owned it for 1 year. Whatshouldbe the realizedyield ?

Reference no: EM132906543

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