
a(i)
To calculate:
The
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
a(i)

Answer to Problem 38PS
Price of Zero coupon bond having yield to maturity is
Explanation of Solution
Given:
Coupon rate
Face value
Price of the bond
Where,
PV is
PMT is coupon payment,
a(ii)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
a(ii)

Answer to Problem 38PS
Price of
Explanation of Solution
Given:
Coupon rate
Face value
Price of the bond
Where
PV is present value on which bond can be purchased
PMT is coupon payment i.e. $80
a(iii)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
a(iii)

Answer to Problem 38PS
Price of
Explanation of Solution
Given:
Coupon rate
Face value
Price of the bond
Where,
PV is present value on which bond can be purchased
PMT is coupon payment i.e. $100
b(i)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
b(i)

Answer to Problem 38PS
Price of zero coupon bonds having yield to maturity is
Explanation of Solution
Given:
Coupon rate
Face value
We stand on next year so total year of maturity on the beginning of next year is
Price of the bond
Where,
PV is present value on which bond can be purchased
PMT is coupon payment i.e. $100
b(ii)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
b(ii)

Answer to Problem 38PS
Price of
Explanation of Solution
Given:
Coupon rate
Face value
We stand on next year so total year of maturity on the beginning of next year is
Price of the bond
Where,
PV is present value on which bond can be purchased
PMT is coupon payment i.e.
b(iii)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
b(iii)

Answer to Problem 38PS
Price of
Explanation of Solution
Given:
Coupon rate
Face value
We stand on next year so total year of maturity on the beginning of next year is
Price of the bond
Where,
PV is present value on which bond can be purchased
PMT is coupon payment i.e.
c(i)
To calculate:
The
Introduction:
Return is a profit on an investment. So rate of return is a profit over a period of time of investment. It expressed as percentage of the original investment.
c(i)

Answer to Problem 38PS
Rate of return on zero coupon bonds having yield to maturity is
Explanation of Solution
Given:
Coupon rate
Face value
PV as per
PV as per
Total Income on bond including coupon income is
Rate of return on the bond
c(ii)
To calculate:
The rate of return on
Introduction:
Return is a profit on an investment. So rate of return is a profit over a period of time of investment. It expressed as percentage of the original investment.
c(ii)

Answer to Problem 38PS
Rate of return on
Explanation of Solution
Given:
Coupon rate
Face value
PV as per
PV as per
Here, formula to calculate and given are added followed by a detailed explanation / working out the complete problem.
Total Income on bond including coupon income is
Rate of return on the bond
c(iii)
To calculate:
The rate of return on
Introduction:
Return is a profit on an investment. So rate of return is a profit over a period of time of investment. It expressed as a percentage of the original investment.
c(iii)

Answer to Problem 38PS
Rate of return on
Explanation of Solution
Given,
Coupon rate
Face value
PV as per
PV as per
Total Income on bond including coupon income is
Rate of return on the bond
Want to see more full solutions like this?
Chapter 10 Solutions
Essentials Of Investments
- Unit 02 Part 3: New City BandAs the volunteer business manager for the New City Band (City Band), you are responsible for preparing the operating budget for the organization’s upcoming summer concert season. Each year, City Band presents up to 20 weekend performances, depending on weather conditions. The concerts are free to the public,but the band hangs a pot from the bandstand and people leave small donations in it. On average, City Band gets $100 in donations at each of its performances. In addition to donations, New City pays the band $3,000 per season plus $125 for each performance.City Band also has a small endowment of $100,000 on which it expects to earn 3.5 percent in the coming fiscal year. City Band’s trustees have decided to use that money to pay for operating expenses if they need to.City Band pays its conductor $3,000 for the summer season and has aninsurance policy to protect it against any loss of equipment or damage to the bandstand. That policy costs the band…arrow_forwardhow to solvearrow_forwardHow much working capital does Airbnb have for the year 2024? Discuss the components of working capital and calculations. What is the amount of the total assets that Airbnb reported for the year 2024? List the assets included. What is the amount of the total liabilities that tAirbnb reported for the year 2024? List the liabilities included.arrow_forward
- How much working capital does Airbnb have for the year 2024? State the components of working capital and calculations. What is the amount of the total assets that Airbnb reported for the year of 2024 and list the assets?arrow_forwardWhat is an account that requires present value calculations. State both the account name and the amount for the account you select. What inventory method does Airbnb employ and explain how this method works? Calculate Airbnb inventory turnover for the year 2024. What does inventory turnover tells an investor?arrow_forwardWhat was the free cash flow for the year 2024 for Airbnb and formula used for their calculations? Explain the importance of free cash flow.arrow_forward
- What is the useful lives for the various types of property, plant, and equipment owned by Airbnb?arrow_forwardWhat depreciation method does Airbnb employ and how does this depreciation method works? Does Airbnb have any impaired assets?arrow_forwardNew City BandAs the volunteer business manager for the New City Band (City Band), you are responsible for preparing the operating budget for the organization’s upcoming summer concert season. Each year, City Band presents up to 20 weekend performances, depending on weather conditions. The concerts are free to the public,but the band hangs a pot from the bandstand and people leave small donations in it. On average, City Band gets $100 in donations at each of its performances. In addition to donations, New City pays the band $3,000 per season plus $125 for each performance.City Band also has a small endowment of $100,000 on which it expects to earn 3.5 percent in the coming fiscal year. City Band’s trustees have decided to use that money to pay for operating expenses if they need to.City Band pays its conductor $3,000 for the summer season and has aninsurance policy to protect it against any loss of equipment or damage to the bandstand. That policy costs the band $500 for the summer plus…arrow_forward
- What are asset type and the useful lives for a company mean?arrow_forwardWhat was the amount of cash (and cash equivalents) that Airbnb reported for the year of 2024? State the amounts for each item you included in this number. How much working capital does Airbnb have for the year 2024? State the components of working capital and calculations. What is the amount of the total assets that Airbnb reported for the year of 2024 and list the assets?arrow_forwardWhat are Independent Auditors?What is a normal day for a Independent Auditor? What are their responsibilities?arrow_forward
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education





