A 30-year security has a price of $19,759.12. The security pays $ 1,000 at the end of each of the next 10 years, and then it pays a different fixed cash flow amount at the end of each of the following 10 years. Finally, in years 21 - 30 it pays $4,000 per year at year end. Interest rates are 8.0%. What is the annual cash flow amount between years 11 and 20?

A 30-year security has a price of $19,759.12. The security pays $ 1,000 at the end of each of the next 10 years, and then it pays a different fixed cash flow amount at the end of each of the following 10 years. Finally, in years 21 - 30 it pays $4,000 per year at year end. Interest rates are 8.0%. What is the annual cash flow amount between years 11 and 20?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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if you invest $20,000 in a security today, how much will it be worth in six years? The security pays 6% compounded monthly.
You have decided to buy a perpetual bond. The bond makes one payment at the end of every year forever and has an interest rate of 7%. If the bond initially costs $5000, what is the payment every year?
At present, the real risk free rate of interest is 0.020 while inflation is expected to be 0.020 for the next 2 years. If a 2 year Treasure Note vields 0.047. What is the Maturity Risk Premium for this 2 ear Treasury Note? GIVE ANSWER IN DECIMAL NUMBERS. (3 DECIMAL PLACES) Assume the expected inflation rate to be 0.034. If the current current real rate of Iinterest is 0.065. What would the nominal rate of interest be? GIVE ANSWER IN DECIMAL NUMBERS. (3 DECIMAL PLACES) At present, 10 year Treasury Bonds are yielding 0.039. while a 10 year Corporate Bond is yielding 0.066. If the liquidity risk premium on the corporate bond is 0.003. What is the Corporate Bonds Default Risk Premium?ANSWER IN DECIMAL NUMBERS ONLY TO 3 PLACES (AS SHOWN IN THE You are considering an investment that you expect will return an 0.089 return next year and you expect your real rate of return will be 0.125. What do you expect inflation to be next vear?GIVE ANSWER IN DECIMAL NUMBERS. (3 DECIMAL PLACES)
At present, the real risk free rate of interest is 0.020 while inflation is expected to be 0.020 for the next 2 years. If a 2 year Treasure Note vields 0.045. What is the Maturity Risk Premium for this 2 ear Treasury Note? GIVE ANSWER IN DECIMAL NUMBERS. (3 DECIMAL PLACES) Assume the expected inflation rate to be 0.040. If the current current real rate of Iinterest is 0.083. What would the nominal rate of interest be? GIVE ANSWER IN DECIMAL NUMBERS. (3 DECIMAL PLACES) At present, 10 year Treasury Bonds are yielding 0.039. while a 10 year Corporate Bond is yielding 0.066. If the liquidity risk premium on the corporate bond is 0.003. What is the Corporate Bonds Default Risk Premium?ANSWER IN DECIMAL NUMBERS ONLY TO 3 PLACES (AS SHOWN IN THE You are considering an investment that you expect will return an 0.038 return next year and you expect your real rate of return will be 0.69. What do you expect inflation to be next vear?GIVE ANSWER IN DECIMAL NUMBERS. (3 DECIMAL PLACES)
5) You have just bought a security that pays $500 every six months. The security lasts for 10 years. Another security of equal risk also has a maturity of 10 years, and pays 10 percent compounded monthly (that is, the nominal rate is 10 percent). What should be the price of the security that you just purchased?
A credit default swap requires a semi annual payment at the rate of 200 basis points per year. The principal is $1 billion and the credit default swap is settled in cash. A default occurs after four years and two months, and the calculation agent estimates that the price of the cheapest deliverable bond is 60% of its face value shortly after the default. List the cash flows and their timing for the seller of the credit default swap..
Suppose the interest rate on a 3-year Treasury Note is 2.25%, and 5-year Notes are yielding 4.00%. Based on the expectations theory, what does the market believe that 2-year Treasuries will be yielding 3 years from now?
How much do you have to deposit today so that beginning 11 years from now you can withdraw $12,000 a year for the next 6 years (periods 11 through 16) plus an additional amount of $24,000 in the last year (period 16)? Assume an interest rate of 9 percent.
A 20-year annuity of forty $7,000 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. a. If the discount rate is 11 percent compounded monthly, what is the value of this annuity 4 years from now? b. What is the current value of the annuity?
You took out a $200,000 mortgage for 30 years. The contract rate is tied to the one-year U.S. treasury rate (index rate). The fixed risk premium for your mortgage is 9%. Your interest rate will be adjusted every year. For the first year, the index rate is 1.5%. What is the outstanding principal at the end of year 1? $95,758 $198,999 $197,769 $96,726
A royalty contract promises a $500,000 sign-up bonus; ten annual royalty payments, starting with $250,000, next year then growing at a rate of 6.5%; and a final bonus (in year ten, together with the last regular payment) of $800,000. If the appropriate discount rate is 10.8%, what is the value of all the payments if this royalty contract is signed today? Use the annuity formula in some of your calculations!
A security pays $800 every 8 years forever. The appropriate discount rate is 2% (EAR). What is the value of the security if the first payment occurs 5 years from now?

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