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FIN315 Ch. 8 HW

Financial Markets and Institutions (with Stock Trak Coupon)

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Financial Institutions & Markets – FIN315 Ch. 8 HW, #1-13, 17 1.  A) PV = 110/(1 + 11%)^ 1 + 110/(1 + 11%)^2 + 110/(1 + 11%)^3 + 1110/(1 +  11%)^4 =  $1000.04 B) PV = 110/(1 + 14%)^ 1 + 110/(1 + 14%)^2 + 110/(1 + 14%)^3 + 1110/(1 +  14%)^4 =  $912.61 C) PV = 110/(1 + 9%)^ 1 + 110/(1 + 9%)^2 + 110/(1 + 9%)^3 + 1110/(1 + 9%)^4  $1064.85 2.   0/(1 + 12%)^1 + 0/(1 + 12%)^2 + 100,000/(1 + 12%)^3 =  $71179.44 3. 0/(1 + 14%)^1 + 0/(1 + 14%)^2 +0/(1 + 14%)^3 + 0/(1 + 14%)^4 + 0/(1 + 14%)^5  + 1000/(1 + 14%)^6 =  $455.60 4. A) Y1 (6,000,000/(1 + 12%)^1) .80 = 4,285,714.29      Y2 (6,000,000/(1 + 12%)^2) .77 = 3,683035.71      Y3 (6,000,000/(1 + 12%)^3) .74 = 3,160,367.29      Y4 (56,000,000/(1 + 12%)^4) .72 = 25,624,902.19 PV = (6,000,000/(1 + 12%)^1) .80 + (6,000,000/(1 + 12%)^2) .77 + (6,000,000/(1  + 12%)^3) .74 +  (6,000,000/(1 + 12%)^4) .72 + (6,000,000/(1 + 12%)^5) .68 +  (56,000,000/(1 + 12%)^6) .66 =  34,915,046.94 B) Cardinal would be affected favorably because the worth of the bond is greater  when they decide to sell it than if they sold it at maturity.
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