A $5000 Mauranol, Inc., corporate bond matures in 10 years and has a coupon rate of 7.2% paid semiannually. (a) If the yield rate is 8% compounded semiannually, find the bond’s market price. (b) Three years later the yield rate is 5.8%. If the bond holder wishes to sell at this time, what is the bond’s current market price? (c) If you bought a $5000 Mauranol, Inc., bond at the price in part (a), collected 3 years of coupons, and sold at the price in part (b), what amount would you have earned on your original investment?
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
A $5000 Mauranol, Inc., corporate bond matures in 10 years and has a coupon rate of 7.2% paid semiannually.
(a) If the yield rate is 8% compounded semiannually, find the bond’s market price.
(b) Three years later the yield rate is 5.8%. If the bond holder wishes to sell at this time, what is the bond’s current market price?
(c) If you bought a $5000 Mauranol, Inc., bond at the price in part (a), collected 3 years of coupons, and sold at the price in part (b), what amount would you have earned on your original investment?
(d) Suppose you made a single investment with principal equal to the amount paid in part (a), and after 3 years you received a single lump sum return equal to the amount from part (c). What interest rate compounded semiannually would you have earned
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