You own a zero-coupon bond that will pay 10,000 in two years. The interest rate from 2021 to 2022 is 0.09 and the interest rate from 2022 to 2023 is 0.03. What is the current price of this bond? Please give your answer to two decimal places. (Hint: one must discount this bond twice: once from 2022 to 2021; and then again from 2021 to 2020.)
Q: Answer the question based on the following information for a bond having no expiration date: bond…
A: The interest rate is the percentage of the principal amount that a person must pay in annual…
Q: The central bank is selling $100 worth of bonds payable in one year. The price it gets today is $98.…
A: Do you understand what the "implied interest rate" is? The implicit interest rate in a commercial…
Q: Elroy Harris is considering whether to buy a corn and soybean farm in Iowa. The farm will cost…
A: Accounting profit is the net income from a business, which is revenue minus explicit costs. Economic…
Q: Is it possible for a one-year coupon bond to have a negative nominal interest rate? Explain, how?
A: Yes, it is possible for a one-year coupon bond to have a negative nominal interest rate as long as…
Q: Assume that a bond has a face value of $250,000. It has a maturity of 1 year and the coupon rate of…
A: Here we calculate the yield maturity by using the given information , so calculation as follow-
Q: You decide to purchase a new home and need a $80,000 mortgage. You take out a loan from the bank…
A: A mortgage is sometimes a need for purchasing a home, but it can be challenging to determine how…
Q: Suppose that upon graduation you decide to buy a house in Riverside. You have $5,000 of cash savings…
A:
Q: The bonds' value is not affected by inflation because most bonds pay a fixed coupon rate over time.…
A: Bonds are units of corporate debt being issued by companies and also being securitized as tradeable…
Q: f a one year discount bond that pays $1000 at maturity, is held for the entire year ,and the…
A: Face value on discount bond =$1000Purchase price of discount bond = $950The rate of interest needs…
Q: If the interest rate is 8 percent, the present value of $200 paid one year from now equals $ If the…
A: Present value is the value of investment in today's dollar. Future value is the value of investment…
Q: Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond…
A: Bonds are debt instruments with long maturities with annual or semiannual interest rates to be paid…
Q: Suppose you buy a house for $250,000. One year later, the market price for the house has fallen to…
A: Return on Investment: The return on investment is the benefit gained by the investor from making an…
Q: Answer the next question on the basis of the following information for a bond having no expiration…
A: The equilibrium price and quantity of bonds traded in the market are determined by the bonds market…
Q: Suppose you buy a big-screen TV with $1,000 down and $500 per year for the next two years. If the…
A: A person buy a big-screen TV with $1,000 down and $500 per year for the next two years. If the…
Q: You own a bond with a coupon rate of 6.3 percent and a yield to call of 7.2 percent. The bond…
A:
Q: You decide to purchase a new home and need a $80,000 mortgage. You take out a loan from the bank…
A:
Q: If the price of a one year T-Bill is $2,860 and the value at maturity is $3,000, what would be the…
A: Yield to maturity is given as = (Face value/current value)1/years to maturity - 1 Face value= $3000…
Q: Calculate the following five yields. Calculate yields on 3-month T-bills for each of the prices in…
A: Treasury Bills (abbreviated T-Bills) are a type of short-term financial instrument that have…
Q: Suppose that the interest rate is 4 percent. What is the future value of $100 four years from now?…
A: Interest rate = 4%Principal amount = $100
Q: Hi! Can you help me with the question below? Matt has the choice between receiving $100 now or…
A: Matt has the choice between receiving $100 now or receiving $140 in two years. Simple interest…
Q: Donovan would like to build a game room in his basement but does not want to take a loan. He opens…
A: Future Value is based on an assumed rate or growth in value of an investment or asset over…
Q: A college student borrowed P20,000 from a bank for his tuition fee and promised to pay the amount…
A: Given: Initial amount=P 20000 New amount=P 19200 Interest= P 800
Q: A retired woman has $50,000 to invest but needs to make $6,000 a year from the interest to meet…
A: Annual Return: The total loss or the gain on the investment received over one year. Moreover, it is…
Q: Suppose a(t) = 0.0015 (t-3) + 0.042 (1-2)³ + 1.2145. Calculate values of a(t) and the effective rate…
A: The effective interest rate equation as: a(t)=0.0015(t-3)4+0.042(t-2)3+1.2145 The rate of interest…
Q: The net present value of $1,000 received one year from now will increase with the interest rate.…
A: It can be defined as a financial concept that is used to access the value of the cash flows of the…
Q: You are planning to take out a 5 hundred thousand dollar fixed-rate mortgage with a 30- year term…
A:
Q: Suppose that interest rates are 6 percent in the economy and a safe bond promises to pay $3 per year…
A: A bond is a fixed income instrument that represents a loan made by an investor to a borrower…
Q: Use the following amortization chart Selling price of home $ 96,000 Down payment $5,000 Rate of…
A: The cost of interest refers to the interest paid by the borrower on the borrowed amount to the…
Q: b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantity…
A: The amount of a given commodity or service that consumers want to buy (demand) and how much that…
Q: Suppose that the interest rate is 5 percent. The future value of $1,000 four years from now is $.…
A: Present value is the value of investment in today's dollar. Future value is the value of investment…
Q: what are four different factors that would increase a bonds price, but not by interest rates or…
A: Bonds and interest rates have an inverse relationship, meaning that when interest rates rise, bond…
Q: Below you will find the Demand and Supply Curves for $250,000 bonds that mature in 18 years: Qd =…
A: Given:Qd = 400,000 – 2(P)Qs = 3(P) – 100,000At…
Q: If the interest rate is 20 percent, what is the present value of a bond that matures in two years,…
A: From the given data, we have Interest rate = 20% Amount pays 1 year from now = $85 Amount Pays…
Q: ws?" the ticket owner explained. "We might not even be here in 20 years, and I do not want to leave…
A: The time value of money is used in the present value calculation to discount future cash flows and…
Q: The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, and two…
A: Given: Coupon rate =5% Face value FV=1000 Maturity period =2 years Demand equation of the bond…
Q: 1) If a $2,000 one-year bond pays $170 in annual interest, the interest rate on this bond is (do NOT…
A: Bond is the the form of debt issued by the government or corporate sector to raise capital from the…
Q: If the current price of a bond is greater than its face value: A) There is no right answer. B) the…
A: The interest rate of bond and price of yield have an inverse relationship exist between. The rise in…
Q: The remarkable thing about the events described in the article is that the yield on the 3-month…
A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: Compute the present value of $1,000 to be received in three years if the rate of interest is 11…
A: STEP1 The formula used is for calculating annuity (series of payments which are made at regular time…
Q: , and the value
A: Using the rule of 70, we can estimate the present value of each bond at a 5% interest rate as…
Q: A bond that has a face value of $300 maturing in one year is available for purchase for $252 . What…
A: Given, Face value (F) = $300 Price of bond (P) = $252 Time (t) = 1 year
Q: Erin buys a bond that pays no coupon payments for $160. When the bond matures, she receives $200.…
A: Given that, Buying price of bond = $160 Future value of the bond = $200
Q: Consider a $1200 bond that makes $30 annual coupon payments. If the interest rate is 2 percent and…
A: The present value is a measure of the value of a future payment or the series of future payments…
![You own a zero-coupon bond that will pay 10,000 in two years. The interest rate from 2021 to
2022 is 0.09 and the interest rate from 2022 to 2023 is 0.03. What is the current price of this
bond? Please give your answer to two decimal places. (Hint: one must discount this bond twice:
once from 2022 to 2021; and then again from 2021 to 2020.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb598839e-2f0a-4e6f-b76c-2738a8a482b4%2F68e1c20c-44ec-45b4-b9bb-c94ed4f0b354%2Fwsn3qu9_processed.jpeg&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
- Suppose that the interest rate is 5 percent. The future value of $1,000 four years from now is $. (Enter your response rounded to two decimal places.)Suppose that the market interest rate in an economy is 7 percent and a bond promises to pay $615 after one year, $856 two years from now, and finally $1423 three years from now The equilibrium market price of this bond is $ (Round your response to two decimal places) If this bond were to sell for $2981 in the market, then it is profitable this bond from investors' perspectives.A zero-coupon bond is a bond that is sold for less than its face value (that is, it is discounted) and has no periodic interest payments. Instead, the bond is redeemed for its face value at maturity. Thus, in this sense, interest is paid at maturity. Suppose that a zero-coupon bond sells for $8,500 and can be redeemed in 20-years for its face value of $38,000. What is the annual compound rate of return? Annual compound rate = % (Round to two decimal places as needed.)
- Suppose the interest rate is 10%. If $100 is invested at this rate today, how much will it be worth after one year? After two years? After five years? What is the value today of $100 paid one year from now? Paid two years from now? Paid five years from now?A bond has a Macaulay duration of 10.00 and is priced to yield 8.0%. If interest rates go up so that the yield goes to 8.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7.5%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.5%, the percentage change in the price of the bond is nothing%. (Round to two decimal places.) If interest rates go down to 7.5%, the percentage change in the price of the bond is nothing%. (Round to two decimal places.) Comment on your findings. (Select the best answer below.) A. As interest rates decrease, the price of the bond decreases. As interest rates increase, the price of the bond increases. B. As interest rates increase or decrease, the price of the bond will always increase. C. As interest rates increase or decrease, the price of the bond remains the same. D. As interest rates…The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, and two years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of £)as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantity demanded/supplied at this interest rate? What happens to the demand/supply of the bond as the interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain. e) There is a business cycle contraction, so both supply and demand shifts. After the shift, the new demand curve is given by: D = 4000 + X − 2P , whereas the new supply curve is S = 2P + 200. For which values of X will the interest increase/decrease? Which values of X are in line with empirical data? Please show all the steps and equations used to get to the answers.
- The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, and two years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of £)as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantity demanded/supplied at this interest rate? What happens to the demand/supply of the bond as the interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain. e) There is a business cycle contraction, so both supply and demand shifts. After the shift, the new demand curve is given by: D = 4000 + X − 2P , whereas the new supply curve is S = 2P + 200. For which values of X will the interest increase/decrease? Which values of X are in line with empirical data?Consider a bond without an expiration date that makes a fixed interest payment of $210 per year. Complete the following table by calculating the interest rate on the bond at different sale prices. (Hint: The effective interest rate on a bond is a ratio of the interest payment to the sale price of the bond times 100.) Price of Bond Interest Rate (Dollars) (Percent) 1,200 1,000 750 600 Use the blue points (circle symbol) and the preceding table to plot the relationship between bond prices and interest rates on the following graph. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. The line showing the relationship between bond prices and interest rates has a _____(POSITIVE/NEGATIVE) slope; in other words, there is _______(INVERSE / A DIRECT) relationship between bond prices and interest rates. NOTE- THIS QUESTION IS DIVIDED INTO SUBPARTS . PLEASE ANSWER…you were offered either a simple interest note or a simple discount note with the following terms: $21,399 at 8% for 36 months. calculate the effective interest rate. (do not round intermediate calculations. round your final answer to the nearest tenth percent.): Effective interest rate: ??
- Dell Computer makes its suppliers wait 37 days on average to be paid for their goods; however, Dell is paid by its customers immediately. Thus, Dell earns interest on this float, the money that it is implicitly borrowing. If Dell can earn an annual interest rate of 4%, what is this float worth to Dell per dollar spent on inputs?The price of a bond with no expiration date is originally $1,000 and has a fixed annual interest payment of $150. If the price of the bond then falls by $250, what will be the interest rate yield to a new buyer of the bond?Suppose a bond makes $150 coupon payments at the end of the next two years, at which time the face value of $1,000 is repaid. If the interest rate is 8 percent, then what is the present value of the bond? The present value (PV) of the bond is $1124.83. (Enter your response rounded to two decimal places.)
![Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337617383/9781337617383_smallCoverImage.gif)
![Macroeconomics](https://www.bartleby.com/isbn_cover_images/9781337617390/9781337617390_smallCoverImage.gif)
![Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337617383/9781337617383_smallCoverImage.gif)
![Macroeconomics](https://www.bartleby.com/isbn_cover_images/9781337617390/9781337617390_smallCoverImage.gif)