The bond is selling at $160, maturing in 4 years with a face value of $200. the alternative choice is to deposit your money for a 6% annual rate. Please use both NPV and future value method to calculate and decide will you buy the bond or not?

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A:

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A: Working note:

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A: Interest Rate = r = 5%Initial Cost of Bond = ic = $3000

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A: Alternative 1: Perpetuity that pays $100/year forever Alternative 2: Bond that pays interest of…

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A: Current price of bond is the sum of present value of cash flows from the bond.

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Q: You intend to purchase a 9-year, $1,000 face value bond that pays interest of $65 every 6 months. If…

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A: Present value of annuity can be computed by using the following formula: Here,…

Q: Please clearly write down how you get your answers, such as the variables you used to put in the…

A: This is a question based on bond pricing. You have specifically asked answer for Q - 4 and 5.

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Q: Lisa's new firm plans to issue a permanent callable bond with a par value of $1,000 and a nominal…

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A: Amortized loans refer to equal payments containing  both principal and interest; in which, first of…