MGMT E-2000
Fall, 2014

Problem Set 4
Answers
(100 points total)
All calculations must be shown
Subtract 1 point for arithmetic mistakes if all else is
correct

1.
Calculate the price of the following bonds, where F is the face value, c is the
coupon rate, N is the number of years to maturity, and i is the interest rate
(or discount rate, or yield):

a. 10 points
F = $100, c = 10%, N = 2, i = 8%

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b. 10 points

F = $10,000, c = 6%, N = 3, i = 9%
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c. 10 points

F = $1,000, c = 0%, N = 10, i = 6%
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d. 10 points
F = $10,000, c = 7%, N ? ? (bond never matures), i = 6%

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2. 20 pointsCalculate the yield on the following bonds:

PB = $100.95, F = $100, c = 6%, N = 1

b. 20 points
PB = $712.99, F = $1,000, c = 0%, N = 5

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c. 20 points
PB = $1,176.47, F = $1,000, c = 10%, N ? ? (bond never
matures)

.gif”>MGMT E-2000Fall, 2014Problem Set 4Answers(100 points total)All calculations must be shownSubtract 1 point for arithmetic mistakes if all else is
correct1.
Calculate the price of the following bonds, where F is the face value, c is the
coupon rate, N is the number of years to maturity, and i is the interest rate
(or discount rate, or yield):a. 10 pointsF = $100, c = 10%, N = 2, i = 8%.gif”>b. 10 pointsF = $10,000, c = 6%, N = 3, i = 9%.gif”>c. 10 pointsF = $1,000, c = 0%, N = 10, i = 6%.gif”> d. 10 pointsF = $10,000, c = 7%, N ? ? (bond never matures), i = 6% .gif”>2. 20 pointsCalculate the yield on the following bonds:b. 20 pointsPB = $712.99, F = $1,000, c = 0%, N = 5 .gif”>c. 20 points PB = $1,176.47, F = $1,000, c = 10%, N ? ? (bond never
matures) .gif”>