Question

Question 5 1 pts In a 365-day year country, what is the price (to the nearest $) of a $1m face value, commercial bill purchased 90 days before maturity at a yield to maturity of 3.0%p.a.? Question 6 1 pts An investment costing $1,000 produces a single payment of $3,500 after 5 years. Calculate the return on the investment (%p.a. to one decimal place eg 7.3%) assuming semi-annual compounding. None of the above 26.7% 16.4% 15.4%

Answer 1

Question 5) Commercial bill purchased 90 days before maturity. tied to Maturity = 3.094 p. a. Face values $1m ce $1000,000) Current price of commercial bin = $1,000,000 X where na Godays : 1 period (lton Where (8) Vield to maturity for 90 days 23.0-4-X 90 - 0.73972602739.4 365 Current price of commercial bill : - : $ 1,000,000 x 1 (lt 399.490 365) = $1,000,000 X 0~99265705738 = $ 992;657.05738 = $992,657.06 (rounded off). Question 6) Lovestment Value $1,000 Single payment after Syears ciematurity Value) = $3500 Return on investment (Y) = ? at Semianocal. compounding Annuity value = principal Amount (ltr)n where n = number of years i.en = 5 years => $ 3500 = 1000 (1+x39x2 => $ 3500 = 1000 CI+ 1.) 542 =) $3.5 = (1+r) , = (1+r) = $(3. 50

3) (1+) - H13346158 =) Y = 0.13346158 =) rs 0.26692316. =) 8=26.7% Return on investment (8) = 26 7.1 Question 7 A bond with same coupon rate and yield to maturity (Same percentage) the bond trades at par in the market as it is not priced at premium or discount. There fore answer is None of the above as Bond with 2.5% and When Vield to maturity is also 2.5º8. p.a Bond trades at par. Question-8! 12 Face value of Band = $ 100 quaterly carpon (54p.a) - 100x5% x3 =$1.25 No. Of periods in) liiequaters) = 3x4=12 periods. price of bond = present value of all coupon paymentst - present Value of maturity Valie TCHO)-1]+$100 l ociton (Hon Where 8 = 4% P.a for quaterly = 1% (18)2-17 = $1.25