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# ps1 - METU FEAS ECON 311 SA Hatice pek TA Nutiye Sekin Inst...

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METU, FEAS ECON 311 SA : Hatice İ pek Fall 2009 TA: Nutiye Seçkin Inst: Elif Akbostanc ı PROBLEM SET I 1. Are the following statements true (T) or false (F)? a. The concept of present value is based on the common sense notion that a dollar paid to you in the future is less valuable to you than a dollar today. b. If the current price is less than face value, P B < F, an investor will be subject to capital loss by holding the bond until maturity. Hence the yield to maturity i is smaller than current yield C/P B , which in turn is smaller than the coupon rate C/F c. Current bond prices and interest rates are positively related; when the interest rate rises, the price of bond rises, and vice versa. d. The return on a bond will necessarily equal to the interest rate on that bond. 2. If interest rate is 8%, what is the present value of \$1000 that will be paid after two years? 3. If you put \$1000 per year into the bank at 4% interest rate, after 40 years how much would your savings be?

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ps1 - METU FEAS ECON 311 SA Hatice pek TA Nutiye Sekin Inst...

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