ZuoTi.Pro
Question

today. If the annual market interest rate is 14% and there is no inflation, a bond with face value $56,400 and maturity date

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Ans. Option c

Using the formula for price of the bond we get,

Price = Face value/ (1+interest rate)^ Maturity period

=> Price = 56400/(1+0.14)^8

=> Price = $19771.5307

Thus, the present worth of the bond is $19771.5307

Thank You

0 0
Add a comment
Know the answer?
Add Answer to:
today. If the annual market interest rate is 14% and there is no inflation, a bond...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • A company has an AAA bond (Triple-A bond) with 14 years until maturity. The bond has...

    A company has an AAA bond (Triple-A bond) with 14 years until maturity. The bond has a face value of $1,000 and carries a coupon rate of 5%. Semi-annual interest. Approximately what is the bond market yield today if the current price is $ 1,130?

  • Say that the interest rate is 11% and you invest $200 today, and then another $220...

    Say that the interest rate is 11% and you invest $200 today, and then another $220 exactly one year from today. What is the total future value of these investments two years from today? Group of answer choices $490.62 $498.85 $511.15 $521.08 A coupon bond pays $400 at the end of each year for 3 years, and at the maturity date in 3 years, in addition to the final coupon payment, the bond also makes a face value payout of...

  • 1) A 20-year bond pays interest at 4% and was issued 12 years ago with a...

    1) A 20-year bond pays interest at 4% and was issued 12 years ago with a face value of $2,000. Semi-annual interest. What is the bond's price today if the interest rate on comparable new bond issues is 6%? 2) A company has an AAA bond (Triple-A bond) with 14 years until maturity. The bond has a face value of $1,000 and carries a coupon rate of 5%. Semi-annual interest. Approximately what is the bond market yield today if the...

  • Bond Problems 1. Consider a bond issue as follows: Face $100,000 Stated rate of interest 14%...

    Bond Problems 1. Consider a bond issue as follows: Face $100,000 Stated rate of interest 14% Market rate of interest 20% Maturity in five years Semi-annual interest payments on June 30 and December 31 Date of issue on January 1, 2019 Bond selling price: $81,566 1. Prepare the journal entry for the issuance. 2. Prepare the journal entry for the first interest payment. 3. Prepare the journal entry for the second interest payment. 5. Prepare the Balance Sheet presentation at...

  • The annual market interest rate (yield to maturity) on a $1,000 par value bond with a...

    The annual market interest rate (yield to maturity) on a $1,000 par value bond with a 9.0% annual coupon rate, semiannual coupon payments, and two years to maturity is 8.2%. What must its price be? $1,014.49 $1,025.53 $949.61 $989.06

  • A bond has a face value of $1,000 with a maturity date 15 years from today....

    A bond has a face value of $1,000 with a maturity date 15 years from today. The bond pays semiannually at a rate of 6% nominal per year based on face value. The interest rate paid on similar corporate bonds has decreased to a current rate of 3%. Determine the market value of the bond.

  • You purchased a zero coupon bond one year ago for $296.50. The market interest rate is...

    You purchased a zero coupon bond one year ago for $296.50. The market interest rate is now 6.5 percent. If the bond had 15 years to maturity when you originally purchased it, what is your total return to date if the face value of the bond is $1,000? (Hint: Use the information provided to calculate the price of the zero coupon bond today.) A) 37.74 percent B) 27.40 percent C) 23.35 percent D) 19.95 percent E) 32.58 percent

  • Assume that the market risk-free interest rate is 12.00%. Assume that a zero-coupon risk free bond,...

    Assume that the market risk-free interest rate is 12.00%. Assume that a zero-coupon risk free bond, with maturity 2 years and 100 face value, is trading at 75. Which of the following is true? (a) By lending today for two years at the market rate, and short-selling the bond, you have an arbitrage. (b) By borrowing today for two years at the market rate, and buying the bond, you have an arbitrage. (c) By buying the bond today and investing...

  • Today you purchase a coupon bond that pays an annual interest, has a par value of...

    Today you purchase a coupon bond that pays an annual interest, has a par value of $1,000, matures in six years, has a coupon rate of 10%, and has a yield to maturity of 8%. One year later, you sell the bond after receiving the first interest payment and the bond's yield to maturity had changed to 7%. Your annual total rate of return on holding the bond for that year is ?

  • The formula S C(1+r) models inflation, where C- the value today, r the annual inflation rate...

    The formula S C(1+r) models inflation, where C- the value today, r the annual inflation rate (in decimal form), and S = the inflated value t years from now. If the inflation rate is 5%, how much will a house now worth $87,000 be worth in 10 years? Round your answer to the nearest dollar. The house will be worth S (Round to the nearest dollar as needed.)

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT