Compute the present value of the bond when interest rate

Assignment Help Business Economics

Reference no: EM1353963

Suppose you are thinking of buying a $1000 face-value coupon bond with a coupon rate of 10%, a maturity of 3 years, and a price of $1079.

a. Is the yield to maturity going to be above or below 10%? Why?

b. Write down the equation that can be solved for the yield to maturity of this bond: that is, the equation that equates the present value of the bond payments to the price of the bond.

c. Compute the present value of the bond when the interest rate is 8%.

d. Must the yield to maturity be above or below 8%?

e. Calculate the present value of the bond when the interest rate is 5%.

f. Must the yield to maturity be above or below 5%?

Reference no: EM1353963

Questions Cloud

Illustrate what happens to output and the price level : Illustrate what happens to output, the price level, and the expected price level in both the short run and the long run.

Values, culture and formations of long-term goals : Explain what is the importance of values and corporate culture on the formations of its long-term objectives?

Write business rules that are reflected in erd : Write the business rules that are reflected in the ERD.(Note that the ERD reflects some simplifying assumptions. For example,each book is written by only one author.

Offer some background for your colleagues to understand : Depict upon your personal experience or the experience of someone you know. Offer some background for your colleagues to better understand the situation you are describing.

Compute the present value of the bond when interest rate : Compute the present value of the bond when the interest rate is 8%. Must the yield to maturity be above or below 8%.

Culture on the formations of its long-term objectives : what is the importance of values and corporate culture on the formations of its long-term objectives

Expression evaluate to true if string variable equals string : Write an expression that evaluates to true if and only if the string variable equals the string "end". Suppose that the value of s were "friend".

Influences on american macroculture of the latino culture : Explain some of the influences on the American macroculture of the Latino culture and in what social class would you place professional athletes? Actors and actresses?

Compute the elasticity of demand when the price of a deluxe : Compute the elasticity of demand when the price of a deluxe cheeseburger raises $2.50 to $3.00 which causes sales to fall from 175 deluxe cheeseburgers each day to 125 deluxe cheeseburgers each day.

User Account

All Pages