3. Consider three bonds, A, B, and C, each paying 7% semiannual coupons, and with face value of
USD 1,000. Maturity for each bond is 30 years, 15 years and 5 years respectively. a. For each bond,
calculate the price (i) when the YTM is 10% and (ii) when the YTM is 15%. (3 POINTS) b. What can
you conclude about (i) the bond price yield relationship and (ii) the bond price maturity relationship
of the three bonds? (3 POINTS) 4. Consider the following cases: Case Amount of Initial Deposit ($)
Stated Annual Rate, r (%) Compounding Frequency, m (times/year) Deposit Period (years) A 2,500 6 2
5 B 50,000 12 6 3 C 1,000 5 1 10 D 20,000 16 4 6 a. Calculate the future value at the end of the
specified deposit period. (2 POINTS) b. Determine the effective annual rate (EAR). (2 POINTS) c.
Compare the stated annual rate (r) to the effective annual rate (EAR). What relationship exists
between compounding frequency and the stated and effective annual rates?(1 POINT) 5. Mighty
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- Spring '17
- Ellen Zitani
- Net Present Value, effective annual rate, Internal rate of return, Stated annual rate
