quiz1 solution

# quiz1 solution - FIN4014 fall 2016 Quiz One Name Student ID...

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FIN4014 fall 2016 Quiz One August 26, 2016 Name: Student ID: Assume semiannual compounding and semiannual coupon payments. (a) The par value of a five-year Treasury bond is \$1,000, and the annual coupon rate is 10%. The annual yield is 8%. Calculate the price of the bond. P=C/(1+r)^1+C/(1+r)^2+…C/(1+r)^n+M/(1+r)^n Input: FV=1,000; PMT=50; I/Y=4; N=10 Output: PV=-1,081.11 The price is \$1,081.11 (b) What is the price of the bond if it is a zero coupon bond (i.e., the coupon rate is 0%)?

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