(a) What happens to the price of a 1 year bond with a face value 1,000...
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(a) What happens to the price of a 1 year bond with a face value €1,000 and a coupon of 8% when the interest rate decreases from 8% to 6%. [5] (b) Calculate the present value of the following: (i) A perpetuity with a face value of €100 and a coupon of 6% where the interest rate is 10% and the 1st payment is made at the end of year 1. [3] (ii) A perpetuity with a face value of €100 and a coupon of 6% where the interest rate is 10% and the 1st payment is made at the end of year 10. [3] (iii) A 9 year annuity with a face value of €100 and a coupon of 6% where the interest rate is 10% and the 1st payment is made at the end of year 1. [4] (a) What happens to the price of a 1 year bond with a face value €1,000 and a coupon of 8% when the interest rate decreases from 8% to 6%. [5] (b) Calculate the present value of the following: (i) A perpetuity with a face value of €100 and a coupon of 6% where the interest rate is 10% and the 1st payment is made at the end of year 1. [3] (ii) A perpetuity with a face value of €100 and a coupon of 6% where the interest rate is 10% and the 1st payment is made at the end of year 10. [3] (iii) A 9 year annuity with a face value of €100 and a coupon of 6% where the interest rate is 10% and the 1st payment is made at the end of year 1. [4]
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What happens to the price of a 1 year bond with a face value 1000 and a coupon of 8 when the interest rate decreases from 8 to 6 The price of the bond ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Posted Date:
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