Question

MBA Finance:

1. A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 5% annually (with monthly compounding) how much would you pay today for a zero-coupon bond with a face value of $1,900 that matures in 8 years?

Please round your answer to the nearest hundredth.

2. A financial institution offers a "double-your-money" savings account in which you will have $2 in 8 years for every dollar you invest today. What stated annual interest rate (assuming semi-annual compounding) does this account offer?

Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).

3. You have $50,000 in savings for retirement in an investment earning a stated annual rate of 9% compounded semi-annually. You aspire to have $1,000,000 in savings when you retire. Assuming you add no more to your savings, how many years will it take to reach your goal?

Please round your answer to the nearest hundredth. Note that the HP 12c financial calculator rounds up the periods result to the next integer and will not give the correct answer to the nearest hundredth. Therefore, you should use Excel or a financial calculator that does provide decimal precision to the number of periods.

4. You deposit $800 in a bank account that pays 5% stated annual interest compounded continuously. What is the value of your investment at the end of 9 years? Please round your answer to the nearest hundredth.

Answer #1

MBA Finance Question: 1. A zero-coupon bond is a security that
pays no interest, and is therefore bought at a substantial discount
from its face value. If the interest rate is 9% with annual
compounding how much would you pay today for a zero-coupon bond
with a face value of $1,700 that matures in 4 years?
2. A financial institution offers a "double-your-money" savings
account in which you will have $2 in 6 years for every dollar you
invest today....

A zero-coupon bond is a security that pays no interest, and is
therefore bought at a substantial discount from its face value. If
the interest rate is 8% with annual compounding how much would you
pay today for a zero-coupon bond with a face value of $2,500 that
matures in 6 years?
Please round your answer to the nearest cent.

You have $50,000 in savings for retirement in an investment
earning a stated annual rate of 12% compounded monthly. You aspire
to have $1,000,000 in savings when you retire. Assuming you add no
more to your savings, how many years will it take to reach your
goal? Please round your answer to the nearest hundredth. Note that
the HP 12c financial calculator rounds up the periods result to the
next integer and will not give the correct answer to the...

1. A First State Bank savings account pays interest
semi-annually with an effective annual rate of 4.4%. What is the
stated or nominal interest rate the bank is offering?
2. An 8-year semi-annual payment coupon bond, $1,000 face, has
an expected return of 4% and a coupon of 6%. What is the bond’s
current yield?
3. You purchase a 4-year, 4% coupon bond for par. Interest is
paid annually. One year later, you sell the bond for $1,100. What
is your...

The market price of a bond is $900 for a 10-year bond that pays
interest semi-annually at a coupon rate of 6% per annum. What is
the bond’s expected return, stated on an annual basis compounded
semi-annually? What is the bond’s expected return, stated on an
annual basis compounded annually? Show steps on how to
solve using excel and the formulas used as well as manually how to
solve it

What is the price of a 4-year bond with a coupon rate of 10% and
face value of $1,000? Assume the bond is trading at 10% yield, and
that coupons are paid semi-annually. Assume semi-annual
compounding.
Round your answer to the nearest cent (2 decimal places).
What is the yield of a 3-year bond with a coupon rate of 9% and
face value of $100? Assume the bond is currently trading at a price
of $100, and that coupons are...

Below is a list of prices for $1,000-par zero-coupon Treasury
securities of various maturities. An 12% coupon $100 par bond pays
an semi-annual coupon and will mature in 1.5 years. What should be
the YTM on the bond? Assume semi-annual interest compounding for
this question. Round your answer to 4 decimal places. For example
if your answer is 3.205%, then please write down 0.0321. Maturity
(periods) Price of $1,000 par bond 1 943.4 2 873.52 3 770

A 9.5% coupon bearing bond pays interest semi-annually and has a
maturity of 20 years. If the annual yield to maturity is 5.8%, what
is the current price of this bond? (Answer to the nearest
penny.)

A 6.7% coupon bearing bond that pays interest semi-annually has
a yield to maturity of 6.3% per year. If the bond has a duration of
13.2 years and the market yield decreases 32 basis points,
calculate an estimate of the percent price change due to duration
alone. (Answer to the nearest hundredth of a percent, i.e. 1.23 but
do not use a % sign).

A 8.5% coupon bearing bond pays interest semi-annually and has a
maturity of 6 years. If the annual yield to maturity is 5.6%, what
is the current price of this bond? (Answer to the nearest penny,
i.e. 999.99 but do not use a $ sign.)

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