BUS218 Solutions Chapter 11

# BUS218 Solutions Chapter 11

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BUS218 Solutions Chapter 11 1. Calculator solution is: N = 10  I = 3 PMT = 40  FV = 1000  CPT PV = –1085.30 2. Bond prices using annual compounding: a. N = 15  I = 8 PMT = 50  FV = 1000  CPT PV = –743.22 b. N = 20  I = 6 PMT = 75  FV = 1000  CPT PV = –1,172.05 The first bond has the lower price.  No calculations are really necessary for this problem  because the first bond is obviously a discounted bond (YTM > coupon rate) and the second  is obviously a premium bond (YTM < coupon rate). 4. Annual compounding

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