Sara purchases a 3-year bond with a par value of $100, 4% annual coupons, and redeemable...

 

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Sara purchases a 3-year bond with a par value of $100, 4% annual coupons, and redeemable at $104. The annual effective yield rate is 6%. a) Find the bond purchase price P = b) The bond is sold at a A. premium B. discount c) Fill in the the bond amortization schedule Period t 0 1 2 3 Total Coupon Fr Amount for Interest Earned Accumulation of I₁ = iB₁-1 Book Value Discount P₁ = 1₁ - Fr B₁ = B₁-1 + P₁ Note that EP₁ = C - P = The Amount of Premium. The "principal repaid" is called the "amount for accumulation of discount". It is also called the "write up" because it increases the book value of the bond from P to C. Sara purchases a 3-year bond with a par value of $100, 4% annual coupons, and redeemable at $104. The annual effective yield rate is 6%. a) Find the bond purchase price P = b) The bond is sold at a A. premium B. discount c) Fill in the the bond amortization schedule Period t 0 1 2 3 Total Coupon Fr Amount for Interest Earned Accumulation of I₁ = iB₁-1 Book Value Discount P₁ = 1₁ - Fr B₁ = B₁-1 + P₁ Note that EP₁ = C - P = The Amount of Premium. The "principal repaid" is called the "amount for accumulation of discount". It is also called the "write up" because it increases the book value of the bond from P to C.

Answer rating: 100% (QA)

a To find the bond purchase price P we can use the present value formula for a bond The present valu... View the full answer