EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 14A.5, Problem 1MQ
To determine
Actual value of price.
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Chapter 14A Solutions
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- Consider a coupon bond that has a $1.000 par value and a coupon rate of 9%. The bond is currently selling for $1,150 and has 9 years to maturity. What is the bond's yield to maturity?arrow_forwardA bank pays one percent interest on savings account four times a year. What is the actual annual interest rate?arrow_forwardSteve promises to pay Amanda $2,000 in four years and another $3,000 four years later for a loan of $2,000 from Sandy today. What is the interest rate that Sandy is getting? Assume interest is compounded monthly.arrow_forward
- A $1000-face-value bond has a 10% coupon rate. It has two years to maturity. If the price of the bond is $960 what is the yield to maturity? What would be the yield if the price were $1044.89 instead?arrow_forwardWhat is the percentage change in price for a zero coupon bond if the yield changes from 6.5% to 5.5%? The bond has a face value of$1,000 and it matures in 10 years. Use the price determined from the first yield, 6.5%, as the base in the percentage calculationarrow_forwardSam promises to pay Sandy $2,000 in four years and another $3,000 four years later for a loan of $2,000 from Sandy today. What is the interest rate that Sandy is getting? Assume interest is compounded monthly.arrow_forward
- A five-year bond with a yield of 11% (continuously compounded) pays an 8% coupon at the end of each year. a) What is the bond’s price? b) What is the bond’s duration? c) Use the duration to calculate the effect on the bond’s price of a 0.2% decrease in its yield. d) Recalculate the bond’s price on the basis of a 10.8% per annum yield and verify that the result is in agreement with your answer to (c).arrow_forwardHow can we determine the real (inflation-free) rate of return for a bond?arrow_forwardCalculate the present value of an annuity with monthly deposits of $2,000 at 5% for 20 years. Discuss how the present value of an annuity will change if the deposit is doubled?arrow_forward
- A discount interest loan is a loan arrangement where the interest and any other related charges are calculated at the time the loan is closed. Suppose a one-year loan is stated as $10,000 and the interest rate is 14%. Then, the borrower pays $1,400 interest up front, thereby receiving net funds of $8,600 and repaying $10,000 in a year. What is the effective interest rate on this one-year loan?arrow_forwardIf a one year discount bond that pays $1000 at maturity, is held for the entire year ,and the purchase price is $950 ,then the interest rate is... %arrow_forwardcould you show how to determine the bond's present value without a calculator?arrow_forward
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