Chapter 6 Questions
1. FV= 1,000, N= 15, I= 11, Pmt= 90 (1,000 x .09), PV= 856.18
2. FV= 1,000, N= 6 x 2 = 12, I= 7/2, Pmt= 60 (1,000 x .12 = 120/2), PV=1,241.58
Monthly:
FV= 1,000, N= 6 x12 = 72, I= 7/12, Pmt= 10 (1,000 x .12 = 120/12), PV= 1,244.39
Quarterly:
FV= 1,000, N= 6 x 4 = 24, I= 7/4, Pmt= 30 (1,000 x .12 = 120/4), PV= 1,243.26
Annually:
FV= 1,000, N= 6, I= 7, Pmt= 120 (1,000 x .12), PV= 1,238.33
3. FV= 1,000, N= 10, PV= -975, Pmt= 60, I= 6.35
4. FV= 1,000, N= 5 x 2 = 10, PV= -985, Pmt= 30 (1,000 x .06 = 60/2), I= 3.18 (per semi
annum) I= 3.18 x 2 = 6.35 annually
5. FV= 1,000, N= 25, PV= -1,225, Pmt= 80, I= 6.21
6.
a. FV= 1,000, N= 20, PV= -1,050, Pmt= 100, I= 9.44
b. FV= 1,000, N= 20, I= 10, Pmt= 100, PV= 1,000
c. No, you should not purchase this bond because it is worth $1,000 to you but is selling
for $1,050 in the market.
7.
a. FV= 1,000, N= 7, I= 11, Pmt= 250, PV= 1,659.71
b. FV= 1,000, N= 7, I= 27, Pmt= 250, PV= 939.83
FV= 1,000, N= 7, I= 7, Pmt= 250, PV= 1,970.07
c. As interest rates rise, the present value of the bond falls. As interest rates fall, the