As with any financial instrument, the price of a bond is just the present value of the future cash flows. What is the price of a bond with semiannual couponpayments and the following characteristics?Coupon rate:Years to maturity:Yield to maturity:Par value:$6.00%158.00%1,000Since the bond has semiannual payments, the coupon payments will be:Coupon payments:Now we can find the present value of the coupon payments, the present value of par, and the bond price, which are:Present value of coupon payments:Present value of par:Bond price:Of course, we could have entered the coupon payments and par value in the same PV function, making sure that both were negative. This would give us:Bond price:Practice 7.2 Find Bond Valuation Using the Price FunctionWhat is the price of a bond with the following characteristics?Years to maturity5Settlement date:1/1/2000Maturity date:1/1/2005Annual coupon rate:9.00%Yield to maturity:7.50%Face value (% of par):100Coupons per year:2Bond price (% of par):Dollar price of bond:

To determine the price of a bond, we need to calculate the present value of its future cash flows,…

Answered: As with any financial instrument, the…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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M-REITs, or mortgage REITs, primarily invest in real estate loans and mortgage-backed securities that are often below investment grade. When a mortgage REIT decided some years ago to re-securitize a substantial portion of its CMBS "BB" and "B" securities, it received surprisingly high investment grade ratings of "A" and "BBB" from Standard & Poor's on the new securities that were created from the cash flows of the underlying portfolio of non-investment grade rated securities. But when the financial markets began to fall a few months later, that mortgage REIT quickly went bankrupt and the value of its "A" and "BBB" investment grade rated re-securities fell substantially. The intended purpose of the ratings agencies is: To produce substantial profits for the rating agencies from the fees paid to them for giving higher ratings on investments than might otherwise be appropriate To help businesses and governments raise needed capital by providing them with the ratings they need to…
Imagine that you run a business that manufactures a unique medical product. The potential demand for the product is very short lived and uncertain. Your production cycle is very long, which means you need to have the products ready in advance. If the demand for your product arises (only 30% chance), they will be sold well; if not, the products will remain unsold and you will need to liquidate them for $500 each. You predict that the demand will be normally distributed with mean= 15000 and standard deviation= 7000. The production cost of your product is, on average, $5500. You will sell your product for $12500. Suppose you make 18000 products, and you get lucky and demand will occur this year. What is your expected profit?
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Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent. $400 per year for 10 years at 4%. $ $200 per year for 5 years at 2%. $ $300 per year for 6 years at 0%. $ Rework previous parts assuming they are annuities due. Present value of $400 per year for 10 years at 4%: $ Present value of $200 per year for 5 years at 2%: $ Present value of $300 per year for 6 years at 0%: $
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