1. A perpetuity paying 1 at the beginning of each 4-month period has a present value
of 20. A
second perpetuity pays X at the end of every 3-year period.
Assuming the same annual effective interest rate, the two present values are equal.
1. Fund A is invested at an effective annual interest rate of 3%.
Fund B is invested at an effective annual interest rate of 2.5%
At the end of 20 years, the total in the two funds is 10000. At the end of 31 years, the
Fund A is twice the amount
1. Consider a 10000 par value, 4 year bond bearing a 5% nominal semiannual
coupon rate. Coupons
pay out every six-month period, starting six months after the bond is purchased. The
purchased for P and earns an annual rate of j compounded semiannua
1. An n-year 1000 par value bond with 8% annual coupons has an annual effective
yield of i, where i >
0. The book value (i.e. the value of the remaining payments) of the bond at the end of
year 3 is
1099.84 and the book value at the end of year 5 is 1082.