INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 1, Problem 2PS
Summary Introduction
To think critically about: Possibility of securitization in capital markets that are highly developed.
Introduction:
Securitization: The process of transforming a non liquid asset (asset which cannot be liquidated in terms of finance) into a security is called securitization. Only those assets which are very difficult to be sold are considered for this process. This process involves the financial engineering methods for the transformation.
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The maturity value of an $35,000 non-interest-bearing, simple discount 4%, 120-day note is:
Carl Sonntag wanted to compare what proceeds he would receive with a simple interest note versus a simple discount note. Both had the same terms: $18,905 at 10% for 4 years. Use ordinary interest as needed.
Calculate the simple interest note proceeds.
Calculate the simple discount note proceeds.
What you're solving for
Solving for maturity value, discount period, bank discount, and proceeds of a note.
What's given in the problem
Face value:
$55300
Rate of interest:
10%
Length of note:
95
days
Date of note: August 23rd
Date note discounted: September 18th
Bank discount rate:9 percent
Chapter 1 Solutions
INVESTMENTS-CONNECT PLUS ACCESS
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