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Determine the maximum purchase price you should be willing to pay now for a 6%, $10,000, 10-year bond with interest paid semiannually if we assume your MARR is 8% per year, compounded quarterly.

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Romarie Khazandra Marijuan
Romarie Khazandra MarijuanLv10
28 Sep 2019

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Related questions

17) A $50,000 municipal bond has an interest rate of 6% per year, compounded semiannually. The bond will mature in 10 years. If the market interest rate is 8% per year compounded semiannually, a person purchasing the bond should be willing to pay:

a. An amount less than $50,000

b. $50,000

c. An amount greater than $50,000

d. The amount cannot be determined from the information provided

18) Two mutually exclusive alternatives, A and B, are to be evaluated by the ROR method. The initial investment for alternative B is greater than that of alternative A. If the overall ROR of both alternatives A, and B, is greater than the MARR, then:

a. Select alternative A because it has a lower initial investment cost.

b. Select alternative B because it has a higher initial investment cost.

c. Conduct an incremental analysis and select A if the ROR of the increment exceeds the MARR

d. Conduct an incremental analysis and select B if the ROR on the increment exceeds the MARR.

19) A person purchases a $5,000, 5% per year bond, with interest payable semiannually, for the amount of $4,000. The bond has a maturity date of 14 years from now. The equation for calculating how much the person must sell the bond for 6 years from now in order to make a rate of return of 12% per year, compounded semiannually, is:

a. 0 = 4,000 + 125(P/A,6%,12) + x(P/F,6%,12)

b. 0 = 4,000 + 100(P/A,6%,12) + x(P/F,6%,12)

c. 0 = 5,000 + 125(P/A,6%,12) + x(P/F,6%,12)

d. 0 = 4,000 + 125(P/A,12%,6) + x(P/F,12%,6)

20) How much must you deposit in your retirement account each year for 10 years starting now (i.e., years 0 through 9) if you want to be able to withdraw $50,000 per year forever beginning 30 years from now? Assume the account earns interest at 10% per year.

a. $4,239

b. $4,662

c. $4,974

d. $5,471

7. What is the annual sinking fund payment if in 10 years you need to have $225,000 available for equipment replacement? Use an interest rate of 4% compounded semiannually.

8. What is the present value of 16 years of equal quarterly payments of $2500 at an interest rate of 9% compounded quarterly?

9. What is the present worth of a geometrically increasing series with a first year payment of $10,000 increasing at 5% per year for 25 years if the interest rate is 6% compounded annually?

A company has issued 10-year bonds, with a face value of $1,000,000, in $1,000 units. Interest at 8% is paid quarterly. If an investor desires to earn 12% nominal interest (compounded quarterly) on $10,000 worth of these bonds, what would the purchase price have to be? I know the answer is Vn= $7,688.96.

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