Financial Accounting You have purchased a zero coupon bond that will pay $15,000 toyour newborn child in 21 years. If this bond is discounted at a rateof 2.875% per year, what is today's price (present value) for thisbond?A. $5,654B. $9,348.25C. $8,271.50D. $15,000

We use the Present Value formula:Step-by-Step CalculationPV=8,271.50the correct answer is:Option C:…

Answered: You have purchased a zero coupon bond…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You have purchased a zero coupon bond that will pay $15,000 to your newborn child in 21 years. If this bond is discounted at a rate of 2.875% per year, what is today's price (present value) for this bond? Question content area bottom Part 1 A. $15,000 B. $5,654 C. $9,348.25 D. $8,271.50
What would you pay for a $210,000 debenture bond that matures in 15 years and pays $10,500 a year in interest if you wanted to earn a yield of: Click here to view factor tables. (a) 3%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answes to O decimal places, e.g. 458,581.) Amount to pay $
You purchased a bond at a price of $1,400. In 25 years when the bond matures, the bond will be worth $10,000. It is exactly 17 years after you purchased the bond and you can sell the bond today for $7,300. If you hold the bond until it matures, what annual rate of return will you earn from today? Multiple Choice O 3.6 percent 4.0 percent 8.2 percent 10.2 percent 4.5 percent
How much would you be prepared to pay for a $1,000 bond which comes due in 8 years and pays $100 interest annually assuming your required rate of return is 12% (pick closest answer)? a. $901 b. $1,032 c. $1,007 d. $962
4. You buy a 4% 10-year $1,000 face value bond for $1,148.14. A year later, you sell the bond for $1,200. What is your rate of return on the bond for the year?
What would you pay for a $110,000 debenture bond that matures in 15 years and pays $5,500 a year in interest if you wanted to earn a yield of: Click here to view factor tables. (a) 3%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.
42. Suppose in 2019 you by two year $1,000 face-value 3% coupon bond for $900. In 2020, interes rates decrease to 2%. If you decide to sell your bond in 2020, what will be the selling price of your bond and one-year rate of return for you? A. $1020; 20% B. $918; 5.3% C. $930; -2.1% D. $1,009.8; 15.5%
suppose you own a 40-year bond that has a bond rate of 2% per year. 1. How much money will you lose if the value of the bond today is $10,000 (face value of the bond) and the yield increases to 3% ? 2. If this bond is purchased now for $5,000, what yearly yield would the buyer receive?
a. Assuming you purchased the bond for $350 what rate of return would you earn if you held the bond for 25 years until it matured with a value $1000? a. Rate of return____% b. Suppose under the terms of thebond you could redeem the bond in 2024. DMF agreed to pay an annual interest rate of 1.4 percent until the date. How much would the bond be worth at that time? b. Bond value_____ c. In 2024 instead of cashing in the bond for its then current value you decide to hold the bond until it mature in 2043. What annual rate of return will you earn over the last 19 years? c. Rate of return___%
You win the Console Lottery. They payoff is a growing “console” bond. That means that the bond will pay you $100,000 next year and the payment will grow a 3.5% per year forever. If your required return is 8%, what is the value of the bond to you today? Group of answer choices $2,222,222. $1,250,000. $100,000. $2,857,143.
Problems 63-66 involve zero-coupon bonds. A zero-coupon bond is a bond that is sold now at a discount and will pay its face value at the time when it matures; no interest payments are made.
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You have purchased a zero coupon bond that will pay $15,000 to your newborn child in 21 years. If this bond is discounted at a rate of 2.875% per year, what is today's price (present value) for this bond? A. $5,654 B. $9,348.25 C. $8,271.50 D. $15,000