Question

I need help with question 7.50. I looked at the solution for this one but I don't know if the solution is right or wrong because so many people did not find the solution helpful

205 Exercises for Spreadsheets $10,000 and a coupon rate of 85 per year. payable semiannually? .45 7.46 If you receive a 55000 bond as a graduation present and the bond will pay you $75 interest every 3 months for 20 years, what is the bond coupon rate? A mortgage bond issued by Automation Engineer- ing is for sale for $8200. The bond has a face value of S10.000 with a coupon rate of 85 per year, pay- able annually. What rate of return will be realized if the purchaser holds the bond to maturity 5 years from now? than currently issued bonds. Therefore, they may sell at a premium, a price higher than their face value, because of currently low coupon rates. A 550.000 bond that was issued 15 years ago is for sale for $60,000. What rate of return per year will a purchaser make if the bond coupon rate is 145 per year, payable annually, and the bond is due 5 years from now? Write the ROR equation and use a single-cell spreadsheet function to display the correct answer directly. 7.51 A S10,000 mortgage bond with a bond interest rate of 8 per year, payable quarterly, was purchased for $9200. The bond was kept until it was due, a total of 7 years. What rate of return was made by the purchaser per 3 months and per year (nominal)? 7.52 A savvy investor paid 56000 for a 20-year $10,000 mortgage bond that had a bond interest rate of 898 per year, payable quarterly. Three years after he purchased the bond, market interest rates went down, so the bond increased in value. If the inves- tor sold the bond for $11.500 three years after he bought it, what rate of return did the investor make (a) per quarter, and (b) per year (nominal)? 7.47 An engineer planning for his child's college educa- tion purchased a zero-coupon corporate bond (ie.. a bond that has no dividend payments) for $9250. The bond has a face value of $50,000 and is due in 18 years. If the bond is held to maturity, determine the iº for the investment. 7.48 Janice V. bought a 5% S1000 twenty-year bond for S925. She received a semiannual dividend for 8 years, then sold it immediately after the 16th dividend for $800. What rate of return did she make (a) per semiannual period, and (b) per year (nominal)? 7.49 Four years ago, Valero issued $5 million worth of debenture bonds having a bond interest rate of 10% per year, payable semiannually. Market interest rates dropped and the company called the bonds (i.e.. paid them off in advance) at a 10% premium on the face value. What semiannual rate of return did an investor make who purchased one S5000 bond 4 years ago and held it until it was called 4 years later? 7.53 Ten years ago, DEWA, an electricity and water au- thority, issued $20 million worth of municipal bonds that carried a coupon rate of 6% per year, payable semiannually. The bonds had a maturity date of 25 years. Due to a worldwide recession, interest rates dropped significantly enough for the utility to consider paying off the bonds early at a 10% penalty to the face value. DEWA would then reissue the bonds at the same face value (ie.. S20 million for the remaining 15 years, but at a lower coupon rate of 25 per year, payable semiannually. What would be the semiannual rate of return to DEWA, if it proceeds with this plan? 7.50 During recessionary periods, bonds that were is sued many years ago have a higher coupon rate EXERCISES FOR SPREADSHEETS 7.54 Cloey has just purchased new bedroom furniture from Haverty's for a total of $10.000. She paid 20% down and through a special promotional she can pay off the $8000 in ten $800, no interest uments over the next 10 months. The smaller ates that if she could only pay $600 on time when the fourth payment was due. (a) Calculate the equal monthly payments that she must now pay, again in the full amount and on time to avoid further penalties stated in additional fine print" of the agreement. the local amount she paid for the fur

Answer 1

Answer :-

Original Value - $50000

Current Value - $60000

ROR = ?

So

Formula -

ROR - (Current Value - Original Value)*100/Original Value

=($60000-$50000)*100/$50000 = 20

ROR is 20