adms_3530_assignment_1_fall_2012_solution

08 9499 77021 92028 6b at the end of year 3 20

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Unformatted text preview: 5 3.252% Page 16 of 18 #7a) 14 2 28 1000 0.09 2 1 1 0.095 436.3683405 0.095 1000 1 1 45 0.19 2 45 1 1 0.095 1.095 1000 1.095 78.7779478 515.1462883 The price of the bonds in 2008 is $515.14 #7b) 2002 2008 90 1000 90 515.14 0.09 0.1747 9% 17.47% The current yield not an appropriate measure of the return for the GM bonds because it ignores capital gains. Page 17 of 18 #7c) 7% 0.07 14 2 28 45 1000, 1 1 0.035 1 1000 1.035 381.6543404 45 1176.670188 12 1176.670188 1000 0.71667 1 Annualized rate of return = 1.71667 0.035 1 1 0.035 1.035 795.0158481 07 2 ??? 1 45 0. 1000 0.100773678 0.094244745 9.4244% 45 12 . 1 #7d) 1 0.02 45 0 1.02 0.02 1 ? ? 603.5440378 603.5440378 1176.670188 1000 1000 0.780214226 Annualized rate of return = 1.780214226 0.100893678 10.0893% 1 Page 18 of 18...
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