Self-Assessment HW4E (zero-coupon bond)
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School
University of Maryland, University College *
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Course
330 7980
Subject
Finance
Date
Nov 24, 2024
Type
docx
Pages
4
Uploaded by Dogmom87
Question
1
Marco
Chip,
Inc.
just
issued
zero-coupon
bonds
with
a
par
value
of
$1,000.
The
bond
has
a
maturity
of
19
years
and
a
yield
to
maturity
of
11.63
percent,
compounded
semi-annually.
What
is
the
current
price
of
the
bond?
Round
the
answer
to
two
decimal
places.
Your
Answer:
11674
Answer
W
Hide
Check
my
answer
Step
1:
Think
in
terms
of
periods
instead
of
years
«
19
years
means
19*2
=
38
semi-annual
periods
«
Annual
interest
rate
11.63%,
compounded
semi-annually,
means
11.63%/2
=
5.815%
per
each
half-of-a
year
Step
2:
Open
Excel.
Click
Formulas
-
Financial
-
find
function
PV
Enter:
Rate
11.63%/2
Nper
19°2
Pmt
0
(since
it
is
a
zero-coupon
bond)
FV
1000
Type
O
Get
the
answer
116.74
=PV(11.63%/2,19%2,0,1000,0)
=
116.74
(The
answer
appears
in
Excel
as
a
negative
number)
File
Home
Insert
Page
Layout
Formulas
Data
Rev
23
[
Insert
AutoSum
Recently
Financial
Logical
Text
Date&
Lookup&
Ma
Function
=
Used
~
=
=
v
Timev
Reference~
Tri
Function
Library
Al
-
f
=PV(11.63%/2,19*2,0,1000,0)
4
A
B
c
D
E
F
G
(3116.74)1
Question
2
Black
Water
Corp.
just
issued
zero-coupon
bonds
with
a
par
value
of
$1,000.
The
bond
has
a
maturity
of
30
years and
a
yield
to
maturity
of
6.49
percent,
compounded
annually.
What
is
the
current
price
of
the
bond?
Round
the
answer
to
two
decimal
places.
Your
Answer:
151.61
Answer
W
Hide
Check
my
answer
Open
Excel.
Click
Formulas
-
Financial
-
find
function
PV
Enter:
Rate
6.49%
Nper
30
Pmt
0
(since
it
is
a
zero-coupon
bond)
FV
1000
Type
0
Get
the
answer
151.61
=PV(6.49%,30,0,1000,0)
=
151.61
(The
answer
appears
in
Excel
as
a
negative
number)
File
Home
Insert
Page
Layout
Formulas
Data
DY
]
Insert
~
AutoSum
Recently
Financial
Logical
Text
Date&
Lookup
&
Function
B
Used
~
=
=
v
Time~
Reference-
Function
Library
Al
M
fe
=PV(6.49%,30,0,1000,0)
4
A
B
c
|
D
E
F
1]
(3151.6111
Question
3
10
years
ago,
Mini
Max
Inc.
issued
30
year
to
maturity
zero-coupon
bonds
with
a
par
value
of
$1,000.
Now
the
bond
has
a
yield
to
maturity
of
8.63
percent,
compounded
semi-annually.
What
is
the
current
price
of
the
bond?
Round
the
answer
to
two
decimal
places.
Your
Answer:
184.56
Answer
W
Hide
Check
my
answer
Step
1:
Number
of
years
to
maturity
is
30-10
=
20
years
Step
2:
Think
in
terms
of
periods
instead
of
years
«
20
years
to
maturity
means
20"2
=
40
semi-annual
periods
«
Annual
interest
rate
8.63%,
compounded
semi-annually,
means
8.63%/2
=
4.315%
per
each
half-of-a
year
Step
3:
Open
Excel.
Click
Formulas
-
Financial
-
find
function
PV
Enter:
Rate
8.63%/2
Nper
20°2
Pmt
0
(since
it
is
a
zero-coupon
bond)
FV
1000
Type
O
Get
the
answer
184.56
=PV(8.63%/2,20*2,0,1000,0)
=
184.56
(The
answer
appears
in
Excel
as
a
negative
number)
File
Home
Insert
Page
Layout
Formulas
Data
Revil
KX
E
Insert
AutoSum
Recently
Financial
Logical
Text
Date&
Lookup&
Matt
Function
v
Used
v
v
v
v
Timev
Referencev
Trig
Function
Library
Al
M
fe
=PV(8.63%/2,20*2,0,1000,0)
4
A
B
€
D
E
F
G
($184.56)]
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Question
4
15
years
ago,
Blue
Lake
Corp.
issued
30
year
to
maturity
zero-coupon
bonds
with
a
par
value
of
$5.000.
The
bond
has
current
yield
to
maturity
of
5.83
percent,
compounded
annually.
What
is
the
current
price
of
the
bond?
Round
the
answer
to
two
decimal
places.
Your
Answer:
213
7
Answer
W
Hide
Check
my
answer
Step
1:
Number
of
years
to
maturity
is
30-15
=
15
years
Step
2:
Open
Excel.
Click
Formulas
-
Financial
-
find
function
PV
Enter:
Rate
5.83%
Nper
15
Pmt
0
(since
it
is
a
zero-coupon
bond)
FV
5000
Type
O
Get
the
answer
2,137.17
=PV(5.83%,15,0,5000,0)
=
2,137.17
(The
answer
appears
in
Excel
as
a
negative
number)
File
Home
Insert
Page
Layout
Formulas
Data
2D
g
Insert
AutoSum
Recently
Financial
Logical
Text
Date&
Lookup
&
Function
<
Used
v
=
=
v
Time~
Reference
v
Function
Library
Al
M
e
=PV(5.83%,15,0,5000,0)
4
A
B
|
¢
D
|
E
F
1
(52,137.17)1
2
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