Ch7Solutions

Ch7Solutions - Chapter 7 Problem Solutions 7-1 With your...

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Chapter 7 Problem Solutions 7-1 With your financial calculator, enter the following: N = 10; I/YR = YTM = 9%; PMT = 0.08 × 1,000 = 80; FV = 1000; PV = V B = ? PV = $935.82. 7-5 a. 1. 5%: Bond L: Input N = 15, I/YR = 5, PMT = 100, FV = 1000, PV = ?, PV = $1,518.98. Bond S: Change N = 1, PV = ? PV = $1,047.62. 2. 8%: Bond L: From Bond S inputs, change N = 15 and I/YR = 8, PV = ?, PV = $1,171.19. Bond S: Change N = 1, PV = ? PV = $1,018.52. 3. 12%: Bond L: From Bond S inputs, change N = 15 and I/YR = 12, PV = ?, PV = $863.78. Bond S: Change N = 1, PV = ? PV = $982.14. b. Think about a bond that matures in one month. Its present value is influenced primarily by the maturity value, which will be received in only one month. Even if interest rates double, the price of the bond will still be close to $1,000. A 1- year bond’s value would fluctuate more than the one-month bond’s value because of the difference in the timing of receipts. However, its value would still be fairly close to $1,000 even if interest rates doubled. A long-term bond paying
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This note was uploaded on 03/02/2011 for the course BMGT 340 taught by Professor White during the Spring '08 term at Maryland.

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Ch7Solutions - Chapter 7 Problem Solutions 7-1 With your...

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