answer with detail solutions. without using calclator. tq!

1. A corporate bond has been issued by a company that pays annual coupons of 5% per annum annually in arrear and is redeemable at par in exactly 10 years' time. (0) Calculate the purchase price of the bond at issue at a rate of interest of 4% per annum effective assuming that tax is paid on the coupon payments at a rate of 20%. (Answer: 100) (1) Calculate the price of the bond at issue at a rate of interest of 4% per annum effective assuming payments of tax on the coupon payments are deferred for twelve months at a rate of 20%. (Answer: 100.31) Cli) Give your comment based on results in part (i) and (ii). 2. Tanya buys a 10-year bond. Coupons are payable semi-annually at 9% per annum and it is redeemable at par. Tanya assumes that there is a 4% probability of default in any half year. She also assumes that, if default occurs, she will receive no further payments at all from the bond. For RM100 face value, (rounding your answer to three decimal places) 00) What is the expected payment at the end of the third half year? (Answer: 3.981) (II) What is the purchase price to yield 10% per annum (convertible semi- annually) after allowing for the probability of default? (Answer: 56.662) 3. You deposit X in an account today in order to fund your retirement. You would like to receive payments of 50 per year, in real terms, at the end of each year for a total of 12 years, with the first payment occurring seven years from now. The inflation rate will be 0.0% for the next 6 years and 1.2% per annum thereafter. The annual effective rate of return is 6.3%. Calculate X to the nearest dollar. (Answer: 306) 4. [Past year exam ASC553 June 2015): De Tarra Bank has come up with the assumptions that the interest rates in different years are independent and has probability distributions as below: (0.056 with probability of 0.40) i = 0.080 with probability of 0.35 (0.095 with probability of 0.25) Calculate the standard deviation of the annual interest rate. Answer: 0.01589) 1. A corporate bond has been issued by a company that pays annual coupons of 5% per annum annually in arrear and is redeemable at par in exactly 10 years' time. (0) Calculate the purchase price of the bond at issue at a rate of interest of 4% per annum effective assuming that tax is paid on the coupon payments at a rate of 20%. (Answer: 100) (1) Calculate the price of the bond at issue at a rate of interest of 4% per annum effective assuming payments of tax on the coupon payments are deferred for twelve months at a rate of 20%. (Answer: 100.31) Cli) Give your comment based on results in part (i) and (ii). 2. Tanya buys a 10-year bond. Coupons are payable semi-annually at 9% per annum and it is redeemable at par. Tanya assumes that there is a 4% probability of default in any half year. She also assumes that, if default occurs, she will receive no further payments at all from the bond. For RM100 face value, (rounding your answer to three decimal places) 00) What is the expected payment at the end of the third half year? (Answer: 3.981) (II) What is the purchase price to yield 10% per annum (convertible semi- annually) after allowing for the probability of default? (Answer: 56.662) 3. You deposit X in an account today in order to fund your retirement. You would like to receive payments of 50 per year, in real terms, at the end of each year for a total of 12 years, with the first payment occurring seven years from now. The inflation rate will be 0.0% for the next 6 years and 1.2% per annum thereafter. The annual effective rate of return is 6.3%. Calculate X to the nearest dollar. (Answer: 306) 4. [Past year exam ASC553 June 2015): De Tarra Bank has come up with the assumptions that the interest rates in different years are independent and has probability distributions as below: (0.056 with probability of 0.40) i = 0.080 with probability of 0.35 (0.095 with probability of 0.25) Calculate the standard deviation of the annual interest rate. Answer: 0.01589)