Question

If an investor is expected to receive 650.00 a year every year for the next six years. What is the present value of this annuity using a discount rate of 7.25% 3,074.48 3,064.20 3,059.25 3,062.22 30 A bond with a $10,000 par value has a 6.5% annual coupon rate. It will mature in 6 years, with annual coupon payments. Present annual yields on similar bonds are 7.25% What should the current price bez 9,645.26 9,873.22 OK. Look to the last question which required you to solve for PVA 9,904.36 Now...add a terminal value, or face value of $10,000. Look at question #30 as 10,020.22 a compound question. You have just solved for the value of a "straight bond" If you can solve this question with minimal effort, you will pass the course.

please show all work :)

Answer 1

1)

Present value of annuity= payment per period * [1-(1+i)^-n]/i

i = interest rate per period

n = number of periods

=>

Present value = 650 * [1-(1+0.0725)^-6]/0.0725

= 3074.48

choose a)

2)

price of coupon = Coupon payment per period * [1-(1+i)^-n]/i + par value/(1+i)^n

i = interest rate per period

n = number of periods

Price = 650 * [1-(1+0.0725)^-6]/0.0725 + 10000/(1+0.0725)^6

= 9645.25

choose a)