Ch 15 solutions revised

Ch 15 solutions revised - Assumption The coupon payments...

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Ch. 15 6. $1,172.5 = $20(1 - (1 + k) -36 )/k + $1,000(1 + k) -36 k = 1.39% per quarter YTM = 5.56% p.a. EAR = (1.014) 4 - 1 = 5.72% p.a 7. (a) $858.30 = $55(1 - (1 + k) -16 )/k + $1,000(1 + k) -16 k = 7.00% YTM = 14% p.a. (b) P = $55(1 - (1 + .07) -12 )/.07 + $1,000 (1 + .07) -12 P = $880.86 (c) P = $55(1 - (1 + .06) -12 )/.06 + $1,000 (1 + .06) -12 P = $958.08 (d) PV -858.30 FV 958.08 PMT 55 N 4 I 8.952 %/6 mo. EAR = (1.08952) 2 – 1 = 18.705%
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Unformatted text preview: Assumption : The coupon payments reinvested at 18.705%p.a. compounded semi-annually. (e) Capital gain = $958.08 - $858.30 = $99.78 Capital gains tax = $99.78 X .5 X .40 = $19.96. After-tax maturity payment = $958.08 - $19.96 = 938.12 Coupon after-tax = $55 X .6 = $33 PV-858.30 FV 938.12 PMT 33 N 4 I 5.972%/6 mo. EAR = (1.05972) 2 – 1 = 12.301%...
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This note was uploaded on 10/14/2011 for the course ADMS 3541 taught by Professor Staff during the Winter '10 term at York University.

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