ss778654 - 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

ss778654 - 3 Consider three bonds A B and C each paying 7...

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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

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