Question

In March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under...

In March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $2,000 in March 2040, but investors would receive nothing until then. Investors paid DMF $740 for each of these securities; so they gave up $740 in March 2015, for the promise of a $2,000 payment 25 years later.
  
a. Assuming you purchased the bond for $740, what rate of return would you earn if you held the bond for 25 years until it matured with a value $2,000? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  

Rate of return             %
  
b. Suppose under the terms of the bond you could redeem the bond in 2024. DMF agreed to pay an annual interest rate of 1.5 percent until that date. How much would the bond be worth at that time? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  

Bond value            $
  
c. In 2024, instead of cashing in the bond for its then current value, you decide to hold the bond until it matures in 2040. What annual rate of return will you earn over the last 16 years? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  

Rate of return             %

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under...
In March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $2,000 in March 2040, but investors would receive nothing until then. Investors paid DMF $900 for each of these securities; so they gave up $900 in March 2015, for the promise of a $2,000 payment 25 years later.    a. Assuming you purchased the bond for $900, what...
In March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under...
In March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $5,000 in March 2045, but investors would receive nothing until then. Investors paid DMF $1,790 for each of these securities; so they gave up $1,790 in March 2015, for the promise of a $5,000 payment 30 years later. a. Assuming you purchased the bond for $1,790, what rate...
n March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under...
n March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $5,000 in March 2040, but investors would receive nothing until then. Investors paid DMF $2,150 for each of these securities; so they gave up $2,150 in March 2015, for the promise of a $5,000 payment 25 years later. a. Assuming you purchased the bond for $2,150, what rate...
In March 2012, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under...
In March 2012, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $1,000 in March 2037, but investors would receive nothing until then. Investors paid DMF $500 for each of these securities; so they gave up $500 in March 2012, for the promise of a $1,000 payment 25 years later. Assuming that you purchased the bond for $500, what rate...
Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for sale...
Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for sale to the public on March 28, 2002. Under the terms of the deal, RBMCC promised to repay the owner of one of these securities $93714 on March 28, 2040, but investors would receive nothing until then. Investors paid RBMCC $22127 for each of these securities; so they gave up $22127 on March 28, 2002, for the promise of a $93714 payment in 2040. Based...
Suppose the government decides to issue a new savings bond that is guaranteed to double in...
Suppose the government decides to issue a new savings bond that is guaranteed to double in value if you hold it for 20 years. Assume you purchase a bond that costs $75. a. What is the exact rate of return you would earn if you held the bond for 20 years until it doubled in value? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If you purchased the...
Suppose the government decides to issue a new savings bond that is guaranteed to double in...
Suppose the government decides to issue a new savings bond that is guaranteed to double in value if you hold it for 22 years. Assume you purchase a bond that costs $50. a. What is the exact rate of return you would earn if you held the bond for 22 years until it doubled in value? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If you purchased the...
Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for...
Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for sale to the public on March 28, 2009. Under the terms of the deal, RBMCC promised to repay the owner of one of these securities $77,089 on March 28, 2035, but investors would receive nothing until then. Investors paid RBMCC $21,135 for each of these securities; so they gave up $21,135 on March 28, 2009, for the promise of a $77,089 payment in 2035....
You will earn the YTM on a bond if you hold the bond until maturity and...
You will earn the YTM on a bond if you hold the bond until maturity and if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 6 percent for $1,150. The bond has 20 years to maturity. What rate of return do you expect to earn on your investment? (Do not...
Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for...
Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for sale to the public on March 28, 2010. Under the terms of the deal, RBMCC promised to repay the owner of one of these securities $83223 on March 28, 2044, but investors would receive nothing until then. Investors paid RBMCC $21109 for each of these securities; so they gave up $21109 on March 28, 2010, for the promise of a $83223 payment in 2044....