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Present Value of a Bond
1. Assume that you wish to purchase a 20 year bond that has a maturity value of $1,000 and makes semiannual interest payments of $40. If you require a 10% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Current Yield of a Bond
2. Consider a $1,000 par value bond with a 7% annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10%?
Change in Interest Rates of Bond
3. A bond has a $1,000 face value, coupon rate of 7% with semiannual payments. Assume that the investors require a rate of return of 8%, what is the present value of the bond? Consider now that the investors require a rate of return of 10%, what is the new present value of the bond? Assume there are 10 years remaining until maturity.
1. Assume that the money market is initially in equilibrium for an economy. Explain with the aid of a diagram how the market adjusts to (i) an increase in money supply (ii
Financials Investments, a group of financial advisors and retirement planners, has been requested to provide advice on how to invest $200,000 for one of its clients. The client has
Evaluating the investment using return on capital employed: Annual depreciation charge = 1500000/5 = $300000 Average investment = 1500000/2 = $750000 Average annual
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