Problem E, You are facing the following four Bonds which pay annual coupons: Bonds...
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Accounting
Problem E,
You are facing the following four Bonds which pay annual coupons:
Bonds A B C D
Face ($) 1000 1000 1000 1000
Present Price ($) 1009.3458 1008.9778 993.5862 967.6028
Annual Coupon ($) 80 80 80 80
Maturity 1 year 2 years 3 years 4 years
Annual Yield Rate (%) 7.00 7.50 ??? 9.00
The annual Yield Rate (%) for bond C is:
a. 8.25
b. 7.75
c. 9.00
d. 8.75
The Forward Rate of bond B for the second year is (%)
a. 8.00234
b. 7.50000
c. 7.70234
d. 8.30234
The discounted value of the face value of bond B at the end of the first year (beginning of the second year) should be
a. 927.2326
b. 923.9059
c. 925.9059
d. 930.2326
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