Reference no: EM133187032

Questions -

Q1) Ayeza thinks of investing $10,000 a year in real terms into her investment account for the next four years. The relevant nominal discount rate is 7.5% and the inflation rate is 4.2%. Calculate the real worth of the investment in today's dollars. (Show all the necessary steps of the calculations)

Q2) Colliers Concord Ltd. has recently issued a bond 5.75% coupon bond outstanding with a current market price of $689.40. The yield to maturity is 11.20% and the face value is $1,000. Interest is paid semiannually. How many years is it until these bonds mature? (Show all the necessary steps of the calculations)

Q3) Manvester Steliing Inc. has semiannual, 12-year bonds which are selling at par and has an effective annual yield of 4.6529%. What is the amount of each interest payment if the face value of the bonds is $1,000? (Show all the necessary steps of the calculations)

Q4) Manning services floats a bond in the market a 6.5% coupon bond with annual payments. The bond stipulates that the yield to maturity is 6.71% and the maturity date is 7 years from today. Calculate the price of the bond if the face value of the bond is $1,000. Comment on the characteristics of this bond.

Q5) In the context of asset pricing, the finance literature implies that an investor will be indifferent between two bonds that show equal yields to maturity if they are of similar default risk. What are some of the factors which could make an investor decide between bonds having similar characteristics of risks? Justify your answer.