Chapter 5

Answers to suggested bond question

5.1.
a. 1000 FV, 10 n, 5 i, COMP PV 613.91
b. 1000 FV, 10 n, 10 i, COMP PV 385.54
c. 1000 FV, 10 n, 15 i, COMP PV 247.19
5.2.
a. 1000 FV, 40 n, 40 PMT, 4 i, COMP PV 1000
b. 1000 FV, 40 n, 40 PMT, 5 i, COMP PV 828.41
c. 1000 FV, 40 n, 40 PMT, 3 i, COMP PV 1231.15
5.3
2 2ndF APR 12 = 11.66, 5.83 I, 1000 FV
a. 40 PMT, 40 n, COMP PV 718.65
b. 50 PMT, 30 n, COMP PV 883.64
5.4
2 2ndF APR 10 = 9.7618, I 4.8809, 40 PMT, 40 n, 1000 FV,
COMP PV 846.35
5.5
-923.14 PV, 1000 FV, 5 I, 30 n, COMP PMT 45
So the coupon rate is 9%
5.9
a. -1200 PV, 1000 FV, 80 PMT, 20 n, COMP I 6.22
b. - 950 PV, 1000 FV, 80 PMT, 10 n, COMP I 8.77
5.10
a. Proceed in 3 steps:
1. 16 n, 2000 PMT, 6 I, COMP PV, FV, 12 n, 0 PMT,
COMP PV 10,044.64
2. 12 n, 2500 PMT, 6 I, COMP PV, FV, 28 n, 0 PMT, COMP PV 4,100.33
3. 40,000 FV, 40 n, 6 i, COMP PV -3,888.89
Change sign in the last PV and sum up all the PVs to get 18,033.86
b. 40,000 FV, 40 n, 6 i, COMP PV -3,888.89