Chapter 5 HW

Chapter 5 HW - PMT? = 55*2 = 110 =110/1020 = 10.78% 16. a....

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Chapter 5 HW 2. N= 12 I= 10%*1,000 = PMT=100 PV= $850 FV=1,000 I/Y=? =12.48% 4. a. Risk-Free Rate + Inflation Premium (IP) = 4% +(2+4/2) =7% for 2-year Trasury securities b. 4%+((2+4+4)/3) =7.33% for 3-year securities 6. Quoted Rate = Rf +IP+MRP IP = 3%+((3+3)/2) =6% 6.3%-6%=MRP =.3% 8. N=20(10 years) PV=$1,100 PMT = 40(twice a year) FV=1,000 a. I/Y= 3.308%*2 YTM= 6.62% b. Called at N=10 PV=1100 FV=1050 YTC=3.24%*2 =6.49% 10. N=5, FV=1,000, PMT = 90 a. 1) PV =829 YTM= 13.98% 2)PV=1,104 YTM= 6.50% b. Yes, because you have a 1.98% rate difference from the YTM and nominal rate on debt, meaning you still profit from the bond. 12. N=20( 10 years), PMT =60(twice a year), FV=1,000, PV=1,100; May be called in 4 years at a call price of $1,060 a. YTM?
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= 10.37% b. Current Yield? = 120/1,100 = 10.91% c. N=18 PV = 1,093.91 (1,100-1093,91)/1,100 =.55%=-.55%(loss) d. N=8, FV =1060 YTC=? =10.15% 14. Current Yield = Coupon Rate/PV
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Unformatted text preview: PMT? = 55*2 = 110 =110/1020 = 10.78% 16. a. 1134.20@ 8%, 1210.71@ 7% = (1210.71-1134.20)/1134.20 = 6.75% b. 463.19 @ 8%, 508.35 @ 7% =(508.35-463.19)/463.19 =9.75% c. 99.38 @ 8%, 131.37 @ 7% =(131.37-99.37)/99/37 = 32.2% d. (80-70)/70 = 14.29% 18. Nominal rate = r+IP+DRP+LP+MRP Risk free rate= 2% IP= (3+4+(3.5*5))/7 =3.5% MRP=.0005(7-1) =.003*100 = .3% Nominal rate = 2%+3.5%+.3= 5.8% 20. Yield for 3-year is 7% 7%=[(3+2r)/3]+2 5=(3+2r)/3 12=2r R=6% 22. N=10, FV=1,000, PMT=110, PV=1,200 a. 8.02% b. 7.59% c. Current Yield+Capital gains yield = 110/1,200+8.02-7.82 = 9.17+.2=9.37% d. The latest that you may want to call is Year 9 when the call percentage is about 105%, but even in Year 10 you still have a call percentage of 104%, meaning that whatever year you call, you still profit....
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Chapter 5 HW - PMT? = 55*2 = 110 =110/1020 = 10.78% 16. a....

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