ACT 2300 Lecture Notes - Lecture 4: Zero-Coupon Bond, Capital Good, Real Interest Rate

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yellowcattle191

21 Jul 2017

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Based on the concept that paid to you one year from now is less valuable than paid to you today. The interest rate is higher n is higher. Having now allows you to save and earn interest. Waiting reduces the amount you can borrow against the future payment. The lender provides the borrower with an amount of funds that the borrower must repay by making coupon payments. Pays the owner of the bond a fixed interest payment (coupon) every year until the maturity date, when a specified final amount (face value) is repaid. Corporation or government agency that that issues the bond. Coupon rate - the dollar amount of the yearly coupon payment expressed as a percentage of the face value of the bond. If the price of a coupon bond is below it"s face value: The yield to maturity is greater than the coupon rate. If the price of a coupon bond is above it"s face value:

Related Questions

A company issued 8%, 10-year bonds with a face amount of $100million. The market yield for bonds of similar risk and maturity is6%. Interest is paid semiannually. At what price did the bondssell? (FV of $1, PV of $1,FVA of $1, PVA of $1, FVAD of $1 and PVADof $1) (Use appropriate factor(s) from the tablesprovided

N=	i =
cash flow	amount	present value
interest	=	=
principal	=	=
price of bonds		=

rubyduck190

A company issued 4%, 10-year bonds with a face amount of $78million. The market yield for bonds of similar risk and maturity is5%. Interest is paid semiannually. At what price did the bondssell? (FV of $1,PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVADof $1) (Use appropriate factor(s) from the tables provided.Enter your answers in whole dollars.)

	Table values are based on
n=	X
i=	X
Cashflow	Amount	Present value
Interest	X	X
Principle	X	X
Price of bonds		X

emeraldseal905

The following situations should be considered independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1. John Jamison wants to accumulate $68,205 for a down payment on a small business. He will invest $35,000 today in a bank account paying 10% interest compounded annually. Approximately how long will it take John to reach his goal?
2. The Jasmine Tea Company purchased merchandise from a supplier for $37,698. Payment was a noninterest-bearing note requiring Jasmine to make seven annual payments of $8,000 beginning one year from the date of purchase. What is the interest rate implicit in this agreement?
3. Sam Robinson borrowed $19,000 from a friend and promised to pay the loan in 10 equal annual installments beginning one year from the date of the loan. Samâs friend would like to be reimbursed for the time value of money at an 11% annual rate. What is the annual payment Sam must make to pay back his friend?

Required 1

Present Value:

Future Value

Required 2

Present Value:

Future Value

Required 3

table or calculator function

Present Value:

Annual Installment

skyalpaca142

ACT 2300 Lecture Notes - Lecture 4: Zero-Coupon Bond, Capital Good, Real Interest Rate

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