PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Question
Chapter 11, Problem 1RQ
To determine
Explain money.
Expert Solution & Answer
Explanation of Solution
According to the trend, the principal amount of bond is $1,000, and the maturity period is 1 year, where if the current one-year interest rate is equal to the coupon rate in the financial market, then Person A will receive $1,000 for the bond. For instance, suppose the coupon rate and the current one-year rate both are 5% that is 50(5% of 1,000), then, the bond holder will receive total $1,050
If the coupon rate is greater than the current year interest rate, then the
Economics Concept Introduction
Bond: A bond is a written and signed legal promise to repay a certain sum of money on a certain date.
Coupon rate: The coupon rate is the interest rate promised when a bond is issued.
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Students have asked these similar questions
31. An analyst is considering the purchase of a Government of Canada bond that will pay its face value of $10 000 in one year's time, but pay no direct interest. The market interest rate is 4% and the bond is being offered for sale at a price of $9400. The analyst should recommend
purchasing the bond because the purchase price is more than its present value and is therefore profitable.
not purchasing the bond because the buyer could earn an additional $376 by investing the $9400 elsewhere.
not purchasing the bond because the purchase price is less than its present value.
purchasing the bond because the purchase price is less than its present value and is therefore profitable.
not purchasing the bond because the buyer could earn an additional $224 by investing the $9400 elsewhere.
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.)
Please do your own work, don't copy from the internet
Q3)
(For the first 20 bond problems, assume interest payments are on an annual basis.)
Bond value (LO10-3) The Lone Star Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 20 years. Compute the current price of the bonds if the present yield to maturity is
6 percent.
9 percent.
Chapter 11 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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