Question

You are considering making a loan at the bank. You will borrow $10,000 from the bank today. The interest rate on the loan is 5 percent nominal compounded annually. You will completely pay off the loan with two equal payments. The first payment is due one year from today, and the second payment is due two years from today. Your loan payments will be $5378.05 each. How much will your loan balance be after you make the first payment?

- A. $4,878.05
- B. $4,621.95
- C. $10,000.00
- D. $5,121.95
- E. Something Else

You are considering making an investment that promises to pay you $600 per year, each year forever. You will receive the first payment five minutes after you purchase the investment. You require a 9 percent return on this type of investment. What should you be willing to pay to purchase this investment today?

- A. $6,666.67
- B. $7,266.67
- C. 666.67
- D. $7,920.67
- E. Something Else

Suppose we are considering the purchase of a bond. The bond has 11 years to maturity and has a 12 percent annual coupon rate. Coupon payments are paid annually, and the first coupon payment will be received one year from today. The bond has a $1,000 face value and has a current price of $975. What is the Yield to maturity on this bond?

- A. 12.42%
- B. 11.83%
- C. 12.00%
- D. 11.00
- E. It is not possible to solve this problem as the calculator gives an error.

You are considering the purchase of a bond. The bond has a $1,000 face value. The bond has 7 years to maturity and the bond has a 10 percent annual coupon rate. Coupon payments are made annually and the first coupon payment will be made one year from today. You require an 8 percent annual rate of return on this investment. Using the methods we discussed in class, how much should you be willing to pay to buy this bond?

- A. $1,000.00
- B. $1,104.13
- C. $2,000.00
- D. $2,104.13
- E. Something Else

Answer #1

**Given,**

**Borrowed amount = $10000**

**Interest rate = 5%**

**Annual repayment = $5378.05**

**Solution :-**

**Interest amount in first year = Borrowed amount x
interest rate**

**= $10000 x 5% = $500**

**Principal amount in first year repayment = Annual
repayment - interest amount in first year**

**= $5378.05 - $500 = $4878.05**

**Now,**

**Loan balance after one year = Borrowed amount -
principal amount in first year payment**

**= $10000 - $4878.05 = $5121.95**

**Thus, your loan balance will be $5121.95 after you make
the first payment.**

**Option 'D' is correct.**

Assume that you are considering the purchase of a 14-year,
noncallable bond with an annual coupon rate of 7.70%. The bond has
a face value of $1000, and it makes semiannual interest payments.
If you require an 11.00% yield to maturity on this investment, what
is the maximum price you should be willing to pay for the bond?

Assume that you are considering the purchase of a 7-year bond
with an annual coupon rate of 4.5%. The bond has face value of
$1,000 and makes semiannual interest payments. If you require an
12.0% nominal yield to maturity on this investment, what is the
maximum price you should be willing to pay for the bond?

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require an 12.7% nominal yield to maturity on this investment,
what is the maximum price you should be willing to pay for the
bond?
a.
$901.80
b.
$674.76
c.
$1243.46
d.
$833.43
e.
$769.5

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require an 10.7% nominal yield to maturity on this investment,
what is the maximum price you should be willing to pay for the
bond?
a.
$874.74
b.
$721.44
c.
$1,000.99
d.
$901.80
e.
$910.81

assume that you were considering the purchase of a 20 year
non-callable bond with an annual coupon rate of 9.5% the bond has a
face value of $1000 and it makes semi annual interest payments. if
you require a 9.5% nominal yield to maturity on this investment
what is the maximum price you should be willing to pay for the
bond?

Assume that you are considering the purchase of a 10-year,
noncallable bond with an annual coupon rate of 5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require an 6% yield to maturity on this investment, what is the
maximum price you should be willing to pay for the bond?
Provide the correct excel function along with
inputs

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semi-annual interest payments.
If you require a yearly 7.4% nominal yield to maturity on this
investment, what is the maximum price you should be willing to pay
for the bond?
Group of answer choices
$1,262.11
$1,217.43
$1,126.76
$1,161.67

Assume that you are considering the purchase of a 15-year bond
with an annual coupon rate of 9.5%. The bond has face value of
$1,000 and makes semiannual interest payments. If you require a 8%
nominal yield to maturity on this investment, what is the maximum
price you should be willing to pay for the bond?
Group of answer choices
925.28
961.57
1083.90
1,129.69
1040.72

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual
interest payments. If you require a 10.7% nominal yield to maturity
(YTM) on this investment, what is the maximum price you should be
willing to pay for the bond?
(Please show work and explain formula of how you got this answer
NOT on excel)

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require a 10.7% nominal yield to maturity (YTM) on this
investment, what is the maximum price you should be willing to pay
for the bond?
Please show how this problem can be solved without a financial
calculator.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 21 minutes ago

asked 29 minutes ago

asked 33 minutes ago

asked 37 minutes ago

asked 39 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago