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Practice Question 5 and 6
Chapter 5
Practice 1
a)
What is the present value of a 5year security with coupon
rate of 7% that pays
annually assuming a discount rate of 5% and par value of $100
b)
A 5year amortizing security with a par value of $10,000 and a coupon of 5% has
and expected cash flow of $2.309.75 per year, assuming there are no principal
prepayments. The annual cash flow includes interest and principal payment. What
is the present value of this amortizing security assuming a discount rate of 6%?
Practice 2
What is the present value of the cash flow of the 5year 7% coupon security in Practice 1
assuming a discount of 4% rather than 5%?
Practice 3
a)
What is the value of a 5year 7% coupon bond per $100 of par value when the
discount rate is 6%, 7% and 8%?
b)
Show that the results obtained in part a are consistent with the relationship
between the coupon rate, discount rate and price relative to par value given in the
text
Practice 4
Compute the value per $100 of are value of a 5year 7% coupon bond, assuming the
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 Spring '10
 Liasa

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