If a security currently worth $12,800 will be worth $15,573.16 five years in the future, what is the implied interest rate the investor will earn on the security—assuming that no additional deposits or withdrawals are made? 3.20% 0.24% 1.22% 4.00%

If a security currently worth $12,800 will be worth $15,573.16 five years in the future, what is the implied interest rate the investor will earn on the security—assuming that no additional deposits or withdrawals are made? 3.20% 0.24% 1.22% 4.00%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 18P

See similar textbooks

Related questions

Q: According to the expectations theory, what will be the interest rate on a three-year bond if the…

A: Expectations theory:- Based on current long-term interest rates, expectations theory tries to…

Q: Consider a bond paying a coupon rate of 10% per year semi-annually when the market interest rate is…

A: Bond price will be Bond price =present value of all coupons +present value of face value…

Q: If a security currently worth $5,600 will be worth $12,379.82 seven years in the future, what is the…

A: The interest rate is the rate representative of the time value of money and it the return in %…

Q: If a security currently worth $5,600 will be worth $12,379.82 seven years in the future, what is the…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: A zera coupon bond with promised payment of $100 to be paid in 5 years has price equal to$80. What…

A: A bond refers to an instrument used by the issuing organization to raise debt capital from…

Q: Suppose we observe the three-year Treasury security rate (1R3) to be 4.9 percent, the expected…

A: Formula for unexpected expectation theory is as follows:-1rn =…

Q: An investor makes a deposit today and earns an average continuous return (force of interest) of 7.5%…

A: Compound interest refers to the method of interest calculation where the interest earned in a period…

Q: Today is time t. You are given the following expected interest rates. i = 3%, 1₁, 1+1=4.5%, %,…

A: The expectation theory refers to the measurement of short-term future rates based on the present…

Q: The following is a portion of the term structure of interest rates on a particular day: Current…

A: Expectation theory helps in estimating the short term rate of interest based on the long term…

Q: a. What is the present value of a security that will pay $4,000 in 20 years if securities of equal…

A: a) Present value = Future value /(1+rate)^years

Q: Suppose two firms enter into a 4-year credit default swap on in March 2021. Assume the notional…

A: Quarterly payment refers to the payment made in each quarter by the borrower to the lender for the…

Q: Suppose the U.S. Treasury offers to sell you a bond for $2,000. No payments will be made until the…

A: Bond is type of debt security which carries fixed return as interest. It can be redeem after the…

Q: The current price of a security is $30. Given an interest rate of 4 continuously, the price of a…

A: Call option is that you believe in that prices of stock will go up.

Q: Suppose you are given a choice of the following two securities: (a) an annuity that pays $10,000 at…

A: PRESENT VALUE OF ANNUITY (PVA): PVA=A×1-11+RNR WHERE, A=ANNUITY R=RATE OF INTEREST N=NUMBER OF YEARS…

Q: What is the present value of a security that will pay $18,000 in 20 years if securities of equal…

A: Present value is the value of the money in current time that is expected to be received in future…

Q: Suppose the U.S. Treasury offers to sell you a bond for $687.25. No payments will be made until the…

A: Offer price = $ 687.25 Maturity price = $ 1000 Years to maturity = 5 Years

Q: In year zero, you invest P10,000 in a 15% security for 5 years. During that time, the average annual…

A: Information provided in the given question: r = real rate of interest = (interest on the security -…

Q: The real risk-free rate is 2.5% and inflation is expected to be 2.75% for the next 2 years. A 2-year…

A: Information Provided: Real risk-free rate = 2.5% Inflation = 2.75% Return on Treasury security…

Q: You have just made an investment for GH¢ 747.25. No payments will be made until the investment…

A: Interest rate is the percentage at which an amount of money is charged or paid over time for the use…

Q: What is the price of a five year zero-coupon, default free security with a face value of $1000.

A: Approach to solving the question: For better clarity of the solution, I have attached the Excel…

Q: A security pays $55 in one year and $133.10 in three years. Present value of this security is $150.…

A: IRR can be calculated by following function in excel=IRR(values,[guess])Values = Cash flowsGuess =…

Q: the expected return on dollar deposits in terms of the dollar is ___________ %

A: Return on Dollar Deposits = 10% Return on Euro Deposits = 7% And Appreciation of Dollar =7%

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Computation of Implied Interest Rate

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Please given answer this general accounting question
If a security currently worth $5,600 will be worth $12,379.82 seven years in the future, what is the implied interest rate the investor will earn on the security—assuming that no additional deposits or withdrawals are made? If an investment of $35,000 is earning an interest rate of 4.00%, compounded annually, how many years will it will take for this investment to reach a value of $44,286.17—assuming that no additional deposits or withdrawals are made during this time? Which of the following statements is true—assuming that no additional deposits or withdrawals are made? If you invest $1 today at 15% annual compound interest for 82.3753 years, you’ll end up with $100,000. If you invest $5 today at 15% annual compound interest for 82.3753 years, you’ll end up with $100,000.
Find the value of a security that pays $300 one year from today, $500 2 years from today, $150 3 years from today and $50 every year after forever. The interest rate is currently 1.2%
For the follwing case, determine the number of years it wll take for the intitial deposit to grow to equal the future amount the given interest rate. Initial Deposit Future Amount Interest Rate $9,998 $18,400 17%
Consider a security with a duration of 8 years. The current interest rate level is 6% p.a. How does the price of the security change if interest rates decrease by 1% (round your answer to two decimals) ? Group of answer choices The price of the security will increase by 7.55%. The price of the security will decrease by 5.55%. The price of the security will increase by 3.55%. None of the given answers.
Which of the following investments that pay will $18,500 in 8 years will have a higher price today? The security that earns an interest rate of 8.50%. The security that earns an interest rate of 12.75%.
If the interest rate is 15%, what is the present valueLOADING... of a security that pays you $1100 next year, $1230 the year after, and $1330 the year after that? Present value is $ enter your response here. ( Round your response to the nearest penny.)
3. Suppose you get for free one of the following two securities:(a) an annuity that pays $10,000 at the end of each of the next 10 years. (b) a perpetuity that pays $10,000 forever, but skips the first 10 payments, meaningthe first cash payment from this security is 11 years from today. Which security would you choose if the annual interest rate at all maturities is 4%?Does your answer change if the interest rate at all maturities is 7.5%? Why or whynot?
5. Suppose you get for free one of following two securities: (a) an annuity that pays$10,000 at the end of each of the next 6 years; or (b) a perpetuity that pays $10,000forever, but it does not begin until 10 years from now (the first cash payment from thissecurity is 11 years from today).Which security would you choose if the annual interest rate is 5%?Does your answer change if the interest rate is 10%? Explain why or why not.
1. If you invest $1,000 today in a security paying 8 percent compounded quarterly, how much will the investment be worth seven years from today? 2. If you invest $20,000 in a security today, how much will it be worth in six years? The security pays 6 percent compounded monthly.
A 2-year Treasury security currently earns 1.97 percent. Over the next two years, the real risk-free rate is expected to be 1.00 percent per year and the Inflation premium is expected to be 0.60 percent per year. Calculate the maturity risk premium on the 2-year Treasury security. (Round your answer to 2 decimal places.) 1% Maturity risk premium
Check My Work eBook What is the present value of a security that will pay $37,000 in 20 years if securities of equal risk pay 11% annually? Do not round intermediate calculations. Round your answer to the nearest cent. 2$