9-3

N 12 FV 1,000 PMT 80 I/Y 12% PV=-752.2

9-4

(Semiannually)

N 40 FV 1,000 PMT 45 I/Y 7.5 PV=-694.2

9-5

A) Semiannually: PMT 45 N 16 FV 1,000 I/Y 4 PV=-1,058.26

B)Annually: PV=-1,057.46

9-6

Semiannually: AA rating N 40 PMT 40 FV 1,000 I/Y 3.75 PV=-1,051.37

A rating N 40 PMT 40 FV 1,000 I/Y 4.25 PV=-952.68

9-7

PV -900 N 20 FV 1,000 PMT 40 I/Y 4.78% (ANNUAL I/Y)= 9.56%

9-8

Semianual: PV-750 FV 1,000 N 16 PMT 45 I/Y=7.17% (ANNUAL I/Y)=14.4%

PV -750 FV 1,000 N 32 PMT 45 I/Y=6.3% (ANNUAL I/Y)=12.68%

PV -750 FV 1,000 N8 PMT 45 I/Y=9.02% (ANNUAL I/Y)=18.04%

9-9

A: ANNUALLY: N 20 PMT 90 FV 1,000 PV -945 I/Y=9.63%

B: SEMIANNUALLY: N 40 PMT 45 FV 1,000 PV -945 I/Y=4.8% (ANNUAL I/Y)=9.6%

9-10

SEMIANNUAL:

N 40 PMT 50 FV 1,000 I/Y 6% PV=-849.5

ANNUALLY: PV=-850.6

Semiannually: PV=-849.53

THE BOND IS A DISCOUNT, MARKET RATE(12%) >COUPON RATE(10%),

PRICE OF THE BOND(850.6)<FACE VALUE(1,000)

9-11

N 30 I/Y 8% PMT 0 FV 1,000 PV = -99.4

N 30 I/Y 10% PMT 0 FV 1,000 PV =-92.30

N 30 I/Y 6% PMT 0 FV 1,000 PV=-233

9-12

N 15 PMT 80 PV-1,175 FV1,000 I/Y=6.2%

9-13

N 14 PMT 90 MARKET PRICE (PV) -1,100 FV 1,000 REQUIRED RATE OF RETURN

10%

A: EXPECTED RATE OF RETURN= 7.8%

B: VALUE OF THE BOND(PV)=-926.33

C: I SHOULD NOT PURCHASE( REQUIRED RATE OF RETURN(10%)> EXPECTED RATE OF

RETURN(7.8%)

, MARKET PRICE(1,100)> FAIR VALUE(926.33)

9-14

N 15 PMT 90 PV -1,250 FV 1,000 I/Y=6.36%

9-15

N 7 FV 1,000 PMT 90 REQUIRED RATE OF RETURN 7% MARKET PRICE 1,100

A: EXPECTED RATE OF RETURN= 7.14%

B: VALUE OF THE BOND=-1,107.78

C:YES, I SHOULD PURCHASE THE BOND( REQUIRED RATE OF RETURN(7%)< EXPECTED

RATE OF RETURN(7.14%)

, MARKET PRICE(1,100)< FAIR VALUE(1,107.78)

9-16

FV 1,000 PMT 50 N 12 PV (MARKET PRICE) 915 I/Y= 6%

B: REQUIRED RATE OF RETURN=9%

VALUE OF THE BOND=-713.57

I SHOULD NOT PURCHASE THE BOND( REQUIRED RATE OF RETURN(9%)> EXPECTED RATE OF
RETURN(6%)

, MARKET PRICE(915)> FAIR VALUE(713.57)

9-17

N 15 FV 1,000 PMT 80 MARKET PRICE 1,085 REQUIRED RATE OF RETURN 10%

A: EXPECTED RATE OF RETURN(I/Y)=7.06%

B: FAIR VALUE=847.87

I SHOULD NOT PURCHASE THE BOND( FAIR VALUE(847.87)<MARKET PRICE(1,085)),

(EXPECTED RATE OF RETURN(7.06%)<REQUIRED RATE OF RETURN(10%))

9-18

PMT 100 FV 1,000 N 15 REQUIRED RATE OF RETURN 12%

A: VALUE OF THE BOND=863.78

B: IF REQUIRED RATE OF RETURN 15%, VALUE OF THE BOND =707.63

IF REQUIRED RATE OF RETURN 8%, VALUE OF THE BOND =1,171.2

The explanation is whenever the interest rate increase, the value of the bond decrease(due
to the inverse relationship)

C: COUPON RATE(10%)<MARKET RATE(12%)

COUPON RATE(10%)<MARKET RATE(15%)

SO SELL AT A DISCOUNT

COUPON RATE(10%)>MARKET RATE(8%)

SO SELL BOND AT A PREMIUM

D: N 5 PMT 100 FV 1,000

IF REQUIRED RATE 12% , FAIR VALUE=927.9

IF REQUIRED RATE 15% , FAIR VALUE =832.4

IF REQUIRED RATE 8% , FAIR VALUE = 1,079.85

E:

COUPON RATE(10%)<MARKET RATE(12%)

COUPON RATE(10%)<MARKET RATE(15%)

SO SELL BOND AT A DISCOUNT

COUPON RATE(10%)>MARKET RATE(8%), SO SELL AT A PREMIUM

9-19

N 20 FV 1,000 PMT 80 REQUIRED RATE OF RETURN 7%

A: VALUE OF THE BOND=1,105.94

B: IF REQUIRED RATE OF RETURN 10%, VALUE OF THE BOND=829.73

IF REQUIRED RATE OF RETURN 6%, VALUE OF THE BOND=1,229.4

C: THE COUPON RATE IS 8%

COUPON RATE(8%)>MARKET RATE(7%), SO SELL BOND AT PREMIUM

COUPON RATE (8%)<MARKET RATE(10%), SO SELL BOND AT DISCOUNT

COUPON RATE(8%)>MARKET RATE(6%), SO SELL BOND AT PREMIUM

D: IF N 10 FV 1,000 PMT 80 REQUIRED RATE 7%

VALUE OF BOND=1,070.24

IF REQUIRED RATE 10%, VALUE OF BOND=877.11

IF REQUIRED RATE 6%, VALUE OF BOND=1,147.20

E: COUPON RATE(8%)>MARKET RATE(7%), SO SELL BOND AT PREMIUM

COUPON RATE(8%)<MARKET RATE(10%), SO SELL BOND AT DISCOUNT

COUPON RATE(8%)>MARKET RATE(6%), SO SELL BOND AT PREMIUM

9-20

PMT 110 FV 1,000 N 20 REQUIRED RATE 9%

A: VALUE OF BOND=1,182.57

B: IF REQUIRED RATE 12%, VALUE OF BOND=925.3

IF REQUIRED RATE 6%, VALUE OF BOND=1,573.5

C:

)WHEN THE REQUIRED RATE GOING DOWN , THE VALUE OF THE BOND INCREASING)

9-21

PMT 70 FV 1,000 N 17 REQUIRED RATE 8.5%

A: VALUE OF BOND=867.6

B: IF REQUIRED RATE 11%, VALUE OF BOND=698.04

IF REQUIRED RATE 6%, VALUE OF BOND=1,104.7

C: WHEN EVER REQUIRED RATE DECREASING, VALUE OF BOND INCREASING

9-22

N 15 FV 1,000 PMT 85 MARKET PRICE 960 REQUIRED RATE 9% coupon rate=8.5%

A: VALUE OF BOND=959.69

B: IF REQUIRED RATE 11%, VALUE OF BOND=820.23

IF REQUIRED RATE 7%, VALUE OF BOND=1,136.62

C:fair value(820.23)<market price(960), I SHOULD NOT TO PURCHASE

FAIR VALUE(1,136.62)>MARKET PRICE(960), I SHOULD PURCHASE