Lương Nguyễn Trà My – BBAEi3A – 11202621

Individual Exercise for Session 3

Chapter 6:
Ex. 17:
t = 5 years r = 8.1% compounded daily PV = $6,500
FV = 6,500*(1 + 8.1%/365)^5*365 = $9,745.03
t = 10 years
FV = 6,500*(1 + 8.1%/365)^10*365 = $14,610.09
t = 20 years
FV = 6,500*(1 + 8.1%/365)^20*365 = $32,839.18
Ex. 18:
t = 10 years r = 9% compounded daily FV = $80,000
PV = 80,000/(1 + 9%/365)^10*365 = $32,529.18
Ex. 20:
PVA = $84,500 APR = 5.2% => r = 5.2%/12 t = 60 months
CF = 84500*(5.2%/12)*((1+5.2%/12)^60)/(((1+5.2%/12)^60)-1) = $1,602.37
EAR = (1 + 5.2%/12)^12 – 1 = 5.33%
Ex. 55:
PVA = $71,500 t = 7%
Annual payments = CF = 71,500*7%*(1+7%)^5/((1+7%)^5 – 1) = $17,438.18
Period 1 2 3 4 5
Principal @ Start of $71,500.00 $59,066.82 $45,763.31 $31,528.55 $16,297.37
period
Interest for period $5,005.00 $4,134.68 $3,203.43 $2,207.00 $1,140.81
Balance $76,505.00 $63,201.50 $48,966.74 $33,735.55 $17,438.18
Payment $17,438.18 $17,438.18 $17,438.18 $17,438.18 $17,438.18
Principal repaid $12,433.18 $13,303.52 $14,234.75 $15,231.19 $16,297.37
Principal @ End of $59,066.82 $45,763.31 $31,528.55 $16,297.37 $0.00
period

Interest pays for 3rd period = 45,763.31*7% = 3,203.43

Total interest pays = 15,690.93
Lương Nguyễn Trà My – BBAEi3A – 11202621

Chapter 7:
Ex. 6: Weismann Co. issued 15-year bonds a year ago at a coupon rate of 4.9 percent. The bonds
make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 4.5
percent, what is the current bond price?
Semi-annual coupon payment = (4.9%/2)*1,000 = $24.5
Number of payments = 15*2 = 28 = n
The semi-annual rate = 4.5%/2 = 2.25% = i
P0 = [24.5*((1 + 2.25%)^28 – 1)/(2.25%*(1 + 2.25%)^28)] + 1000/(1 + 2.25%)^28
= 504.8919 + 536.3239
= 1,041.22
Ex. 7: West Corp. issued 25-year bonds two years ago at a coupon rate of 5.3 percent. The bonds
make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the
YTM?
n = 23*2 = 46
i = 5.3%/2 = 2.65%
Current price = 1,000*105% = $1,050
Par value = $1,000
Semi-annual coupon payment = 1,000*2.65% = $26.5
Excel: =Rate(46,26.5, - 1050,1000) = 2,47%
 YTM = 2*2.47% = 4.93%
Ex. 9: You find a zero coupon bond with a par value of $10,000 and 17 years to maturity. If the
yield to maturity on this bond is 4.2 percent, what is the price of the bond? Assume semiannual
compounding periods.
FV = $10,000
n = 17*2 = 34
i = 4.2%/2 = 2.1%
0 = PV + 10,000/(1 + 2.1%)^34 = $4,933.16
 PV = - 4,933.16