I want help understanding the concepts, Thank you 5) You buy a $1,000 bond with semiannual coupons that matures in 20 years and has yield ratej(2) = 6% and coupon rate r(2). To pay for this bond, you take out a 20 year loan at an annual interestrate of 4% with annual payments of 70 at the end of each year. Using Makeham's formula, computeand find the non time-valued net profit after 20 years.r(2)

Step 1: Compute the coupon rate r(2) using Makeham's formula:r(2) = (1 - (1 + 0.06)^-20) / ($1,000 +…

Answered: 5) You buy a $1,000 bond with…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter29: Interest, Rent, And Profit

Section: Chapter Questions

Problem 1WNG

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Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and semiannual coupons is trading for $1,035.05. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?
Suppose a 10-year, $1,000 bond with a(n) 11% coupon rate and semiannual coupons is trading for a price of $970.75. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9% APR, what will the bond's price be?
Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to maturity, and has a discount rate of 6.5%. Which of thé following would give you the present value - i.e. the price – of the bond? Select one: a. Present Value = Price = $10,500/(1.065)² %3D %3D b. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] + ... + [$500/(1.065)NI, where N=00 c. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] +I$10,000/(1.065)²] %3D d. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²]
1. What is the Single Payment Compound Amount factor for an interest rate of 2% over 10 years? 2. What is the Uniform Gradient Future Worth factor for an interest rate of 10% over 10 years? 3. What is the Uniform Series Present Worth factor for an interest rate of 5.5% over 20 years? 4. A bank pays 3% interest per year (compounded annually). a. To what amount will a $5,000 deposit grow if left in the bank for 10 years? b. Draw the Cash Flow Diagram for this problem.
What is the yield to maturity on a simple loan of $35,000 that requires a repayment of $40,000 in 3 years?
1. A series of equal quarterly receipts of $5000 extends over a period of five years. What is the estimated present worth of this quarterly payment series at 8% interest compounded continuously? 2. You have just inherited $200,000 and wisely decide to invest your money in a diversified portfolio with your investment firm. You financial advisor tells you that you can earn an average of 8% interest per year on your investment. You tell your advisor that you want to retire as soon as your account balance reaches S1,000,000. If you do not add or take money out of your account and interest does not fluctuate, how long, rounded to the nearest year, will it take before you have a S1,000,000 balance?
2. Daniel invests $5,000 today into an investment account. Five years from today, he will begin investing $3,000 every year for ten years. He will then invest $6,000 for the five years after that. With an annual compounding interest rate of 3%, what is the valuation in the account twenty years from today? m
Four years after the issue of a $10,000, 9.9% coupon, 20-year bond, the rate of return required in the bond market on long-term bonds was 8.2% compounded semiannually. b. What capital gain or loss (expressed in dollars) would the original owner have realized by selling the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Capital (Click to select) of $[
What is the percentage change in price for a zero coupon bond if the yield changes from 6.5% to 5.5%? The bond has a face value of$1,000 and it matures in 10 years. Use the price determined from the first yield, 6.5%, as the base in the percentage calculation
5. You receive payments of $10,000 per year from a family trust, but you don't need that money right now. Find FV Annuity: If you deposit your annual payments into an account earning 2% per year, what will be the account balance in 10 years? C= 10,000 r = 0.02 t = 10 (1 = i)^n FV = C =? Find FV Annuity: If you deposit your annual payments into an account earning 2% per year, what will be the account balance in 5 years?
Lorenz curves also can be used to provide a relative measure of the distribution of the total assets of a country. Using data in a report by the economic committee of a certain country, an economist produced the following Lorenz curves for the distribution of total assets in the country in 1963 and 1983, shown below. f(x) = x10 Lorenz curve for 1963 g(x) = x13 Lorenz curve for 1983 Find the Gini index of income concentration for each Lorenz curve and interpret the results. .... What is the Gini index for 1963? (Round to three decimal places as needed.) What is the Gini index for 1983? (Round to three decimal places as needed.) Interpret your results. O A. Total assets were more equally distributed in 1963 O B. Total assets were more equally distributed in 1983 O c. Total assets were distributed the same in 1963 as in 1983.
Suppose you have the alternative of receiving either $15,000 at the end ofseven years or P dollars today. Currently, you have no need for the money, soyou could deposit the P dollars into a bank account that pays 6% interest compounded annually. What value of P would make you indifferent in your choice between P dollars today and the promise of $15,000 at the end of seven years?

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