Answered: Suppose a State of New York bond will…

Suppose a State of New York bond will pay $1,000 ten years from now. If the going interest rate on these 10-year bonds is 5.0%, how much is the bond worth today?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

See similar textbooks

Related questions

Q: tated face value? savings bond cost when you initially purchase it? Assuming 2.69 percent annually,…

A: NPER" stands for the "Number of Periods" in financial and investment calculations. It is a function…

Q: A US government bond in the amount of $1,000 will mature in six years, has no coupon payments, and…

A: To calculate the value of this bond we will use the below formula Value of bond = FV/(1+r)n Where…

Q: You are considering purchasing a bond. The bond will pay you $100 at the end of each year for 20…

A: Time value of money: Time value of money is a vital concept to the investors, as it suggests them…

Q: You are thinking about buying a savings bond. The bond costs $70 today and will mature in 10 years…

A: Bond cost = $ 70 Period = 10 Years Maturity value = $ 155

Q: Suppose that if you purchase a US Treasury bond, it will pay you a one-time payment of $5000 in 10…

A: A Treasury Bond is a bond issued by the Government of USA. It carries no risk of default and are…

Q: You are thinking about buying a savings bond. The bond costs $48 The bond will earn an annual rate…

A: Present Value = pv = $ 48Time = t = 12 YearsFuture Value = fv = $ 98

Q: Suppose a U.S. government bond promises to pay $3,000 three years from now. If the going interest…

A: Present value is the present worth of any sum of money to be received in the future at a specified…

Q: 6. An initial sum of $50,000 is invested in a bond. You will receive payments of $2,000…

A: a. Semi - Annual Interest Rate: Given: Investment amount = $50,000 Semi-Annual Interest received =…

Q: A U.S. government bond matures in 10 years. Its quoted price is now 96.4, which means the buyer will…

A: Bonds are financial instruments which provide fixed returns to its holders. Bonds actually have a…

Q: Consider a fixed-payment security that pays P100 at the end of every year fo the three years. If the…

A: Present value of bond can be calculated by using this equation Present value =C1/(1+r) +C2/(1+r)2…

Q: Suppose a U.S. government bond promises to pay $2,249.73 three years from now. If the going interest…

A: Future value is the value of the present cashflow discounted to today's value.

Q: Imagine that a $10,000 ten-year bond was issued at an interest rate of 6%. You are thinking about…

A: Using excel PV function to calculate the amount you will be willing to pay for this bond.

Q: If a bond will pay $50 interest per year into perpetuity, at what price will this bond sell when the…

A: perpetuity: It is annuity for the infinite time. present value of perpetuity formula: present value…

Q: According to the expectations theory of the term structure of interest, if the 1-year bond rate…

A: 2 Year Bond 1 year from now = (1+rate 3 )^3 / (1+rate 2)^1

Q: Suppose a pure discount State of New York bond will pay $1,000 ten years from now. If the going…

A: A financial instrument that has a fixed income and also helps a company to raise funds for business…

Q: Suppose that the interest rate is 10%. You are considering purchasing a bond that pays…

A: given that, rate of interest = 10% the bond pays $25000 in 6 years Per year the bond pays = $25000 /…

Q: Suppose a Bangko Sentral ng Pilipinas bond will pay P500,000 twelve years from now. If the going…

A: Bond worth today = Present value of the bonds where, Present value of the bonds = Amount to be…

Q: Suppose a U.S. government bond promises to pay $3.000 four years from now. If the going interest…

A: Here PV = Present value FVn = Future value I = Interest rate N = Time period

Q: Suppose a State of Califomla bond will pay 1,000 eight years from now. If the going interest rate on…

A: Worth of the bond can be calculated by discounting the future cash flow of the bond at the given…

Q: You are thinking about buying a savings bond. The bond costs $52 today and will mature in 14 years…

A: This bond is given in the question is Zero-Coupon Bond which is an issue at discount and mature at…

Q: Suppose the government decides to issue a new savings bond that is guaranteed to double in value if…

A: Present value of annuity is the current value of the future payments that are calculated using the…

Q: The bond will earn an annual rate of %. (Round to two decimal places.)

A: An investment that simulates a debt commitment is called a bond. A government, municipality,…

Q: You have decided to buy a perpetual bond. The bond makes one payment at the end of every year…

A: To calculate the payment at the end of each we will use below formula Annual payment = PV*r Where…

Q: A US savings bond will pay you $1,000 in 3 years. If return is 2.85%, how much shoudl you pay for…

A: The payment made for bond at current year will be such as investor will realize 2.85% in each of…

Q: The British government has a consul bond outstanding paying £100 per year forever. Assume the…

A: Annual payment = £100 Annual interest rate = 4%

Q: You are thinking about buying a savings bond. The bond costs $50 today and will mature in 9 years…

A: This bond is given in the question is Zero-Coupon Bond which is an issue at discount and mature at…

Q: The British government has a consol bond outstanding paying £100 per year forever. Assume the…

A: Consol bonds: They are the perpetual bonds that has no maturity period. They are the instruments…

Q: You have decided to buy a perpetual bond. The bond makes one payment at the end of every year…

A: Perpetual bonds do not have a principal payback requirement, in contrast to ordinary bonds, which…

Q: You are thinking about buying a savings bond. The bond costs $54 today and will mature in 7 years…

A: Present Value of Bond = pv = $54Time = t = 7 yearsFuture Value of Bond = fv = $108

Q: You will receive $1000 from a savings bond in3 years from now. The nominal interest rate is 8% and…

A: Future value is the value of present cashflow compounded at a given rate to future date. formula:…

Q: A 20-year government coupon bond has a face value of $1,000 and a coupon rate of 6% paid annually at…

A: Bond's PVwould be present value of interest annuity & maturity amount at market rate of…

Q: If you are considering the purchase of a bond that pays $850 per year forever, and the rate of…

A: The objective of the question is to determine the price of a bond that pays a perpetual annual…

Q: You are thinking about buying a savings bond. The bond costs $130 today and will mature in 10 years…

A: Present Value = pv = $130Time = t = 10 YearsFuture Value = fv = $260

Q: Suppose a U.S treasury bond will pay $4,150 five years from now. If the going interest rate on…

A: Maturity price = $ 4150 Period = 5 Years Annual interest rate = 4.25%

Q: Suppose a U.S. government bond promises to pay $3,000 three years from now. If the going interest…

A: Future Value = 3000 N = 3 Interest Rate = 7%

Q: ) Suppose that today's one-year interest rate is 5%. Consider the following one-year interest rates…

A: The long-term rates serve as a foundation for predicting future short-term interest rates, according…

Q: Suppose a U.S. government bond will pay $1,000 three years from now. If the going interest rate on…

A: A study that proves that the 1value of money today is higher than the future value of money is term…

Question

Suppose a State of New York bond will pay $1,000 ten years from now. If the going interest rate on these 10-year bonds is 5.0%, how much is the bond worth today?

Expert Solution

Step 1

The concept of the time value of money states that the current worth of money is more than its value in the future.

Present value refers to the current value of a sum of money in the future at a specified interest rate.

Here,

The future value of a bond is $1,000

Time in years is 10 years

The interest rate is 5.0%

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

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

Suppose a pure discount State of New York bond will pay $1,000 ten years from now. If the going interest rate on these 10-year bonds is 3.5%, how much is the bond worth today?
Suppose a State of Califomla bond will pay 1,000 eight years from now. If the going interest rate on these 8 year bonds is 6.0% how much is the bond worth today?
Suppose a state of California bond will pay $1,000 eight years from now. If the going interest rate on these 8-year bond is 6.4%, how much is the bond worth today?
Suppose a U.S. government bond will pay $1,000 three years from now. If the going interest rate on 3‐year government bonds is 4%, how much is the bond worth today?
2. Suppose a State of New York bond will pay $1,000 ten years from now. If the going interest rate on these 10-year bonds is 4.9%, how much is the bond worth today: a) with annual compounding b) with monthly compounding
Suppose a U.S treasury bond will pay $4,150 five years from now. If the going interest rate on 5-year treasury bond is 4.25%, how much is the bond worth today?
Suppose a U.S. government bond promises to pay $3,000 three years from now. If the going interest rate on a 3-year government bond is 5%, how much is the bond worth today?
Suppose a U.S. government bond pays $2,155.40 in 5 years at 6% interest. Calculate the present value of the bond.
Suppose a Bangko Sentral ng Pilipinas bond will pay P500,000 twelve years from now. If the going interest rate on these 10-year bonds is 6%, how much is the bond worth today?
A U.S. government bond matures in 10 years. Its quoted price is now 96.4, which means the buyer will pay $96.40 per $100 of the bond’s face value. The bond pays 5% interest on its face value each year. If $10,000 (the face value) worth of these bonds are purchased now, what is the yield to the investor who holds the bonds for 10 years?
A simple "EE US Treasury Savings Bond" pays the holder $1000 in 30 years. Given that the applicable interest rate on the bond is 2.5% APR compounded monthly, how much does the bond cost today? (The purchase date is always time t=0 for each transaction).
Suppose that if you purchase a US Treasury bond, it will pay you a one-time payment of $5000 in 10 years from now. What interest rate would you earn if you bought this bond for $3000?