Question

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 12 years to maturity, and a coupon rate of 6 percent paid annuallly. If the yield to maturity is 9 percent, what is the current price of the bond?

You need to have $34,500 in 7 years. You can earn an annual interest rate of 5 percent for the first 4 years, and 5.6 percent for the next 3 years. How much do you have to deposit today?

You have just won the lottery and will receive $520,000 in one year. You will receive payments for 16 years, and the payments will increase 5 percent per year. If the appropriate discount rate is 11 percent, what is the present value of your winnings?

Answer 1