Question

Question 1 25 pts An investor purchased a "par bond" for $700 with the principal $700. Over n = 9 years the bond will pay 3% coupon annually. Find the IRR of the cash flow stream (also called Yield to Maturity). Note: The bond has the following cash flow stream: at time zero payment $700 is made; for 9 years, at the end of each year the coupon payment (3/100)*700 is made; also at the end of year 9 the principal $ 700 is paid in addition to the last coupon. Margin of error: +/- 0.01 NOTE: submit answer in decimal form, not as a percentage. Example: If answer is 4% submit 0.04.

Answer 1

PV = - 700 Fr-700 PMT= 700*34. 7oox 0.03 - 21 N- 9 yrs financial calculate, we get, 4. = 34. – 10.03 using

FV PMT VY N Start Principal FV (Future Value) $700 N (# of periods) 9 Start Principal $ 700 nnuity 521 PMT (Annuity Payment) PMT made at the beginning O end of each compound period Calculate Results You will need an annual return rate of -3.000% to reach the future value of $700.00.