ans-odd-problems-ch20

Ans-odd-problems-ch2 - CHAPTER 20 LONG-TERM DEBT Solutions to Odd-Numbered Questions and Problems NOTE All end-of-chapter problems were solved

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CHAPTER 20 LONG-TERM DEBT Solutions to Odd-Numbered Questions and Problems NOTE: All end-of-chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability constraints, when these intermediate steps are included in this solutions manual, rounding may appear to have occurred. However, the final answer for each problem is found without rounding during any step in the problem. Basic 1. Accrued interest is the coupon payment for the period times the fraction of the period that has passed since the last coupon payment. Since we have a semiannual coupon bond, the coupon payment per six months is one-half of the annual coupon payment. There are five months until the next coupon payment, so one month has passed since the last coupon payment. The accrued interest for the bond is: Accrued interest = $72/2 × 1/6 = $6 And we calculate the clean price as: Clean price = Dirty price – Accrued interest = $1,140 – 6 = $1,134 3. a. The price of the bond today is the present value of the expected price in one year. So, the price of the bond in one year if interest rates increase will be: P 1 = $60(PVIFA 7%,58 ) + $1,000(PVIF 7%,58 ) P 1 = $859.97
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This note was uploaded on 02/14/2011 for the course FINANCE 620 taught by Professor Halstead during the Fall '09 term at UMBC.

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Ans-odd-problems-ch2 - CHAPTER 20 LONG-TERM DEBT Solutions to Odd-Numbered Questions and Problems NOTE All end-of-chapter problems were solved

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