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    Quantitative Foundation of Financial Management

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    1. Bond. What is the value of a $1,000 par value bond with annual payments of an
    a. 11% coupon with a maturity of 20 years and a 15% required return?
    b. 12% coupon with a maturity of 10 years and a 7% required return?
    c. 8% semiannual coupon with a maturity of 10 years and a 11% required return?
    d. 8% semiannual coupon with a maturity of 20 years and a 6% required return?

    2. Bond. What is the yield to maturity of a $1000 par value bond with an
    a. 10% semiannual coupon and 20 years to maturity and a $1,000 price?
    b. 6.5% semiannual coupon and 13 years to maturity and a $890 price?
    c. 7.5% annual coupon and 19 years to maturity and a $788 price?
    d. 4.5% annual coupon and 7 years to maturity and a $800 price?

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    Solution Preview

    Please see the attached file. Thanks

    Question 1
    VALUATION OF A BOND
    "1. Bond. What is the value of a $1,000 par value bond with annual payments of an 
    a. 11% coupon with a maturity of 20 years and a 15% required return? b. 12% coupon with a maturity of 10 years and a 7% required return?
    c. 8% semiannual coupon with a maturity of 10 years and a 11% required return?
    d. 8% semiannual coupon with a maturity of 20 years and a 6% required return?  
    Part a
    INPUT PARAMETERS
    Parameter Value
    F = Face value of bond $1,000
    n = No. of coupon payments per year 1 per year
    r = Annual Required rate of return 15%
    c = Coupon interest rate 11%
    t = Time to maturity 20 years

    FUNDAMENTAL CONCEPT
    Value of Bond = PV of coupon payments + PV of principal repayment
    PV of coupon ...

    Solution Summary

    Quantitative foundations of financial management is examined.

    $2.19

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