Instruction: Review textbook chapter 6 first. Multiple reading might help. Then try to solve the homework problems quickly.
2. Alicia bought a newly issued $1,000 20% ten-year bond, redeemable at $ 1,100 and having yearly coupons. It was bought at a premium with a price of $1,400. Alicia immediately took a constant amount D from each coupon and deposited it in a savings account earning 8% effective annual interest, so as to accumulate the full amount of the premium by a moment after the final deposit. How much did Alicia deposit each year in the 8% account?
3. A $1,000 bond with a coupon rate of 8% has quarterly coupons and is redeemable after an unspecified number of years at $ 957. The bond is bought to yield 12 % convertible semiannually. If the present value of the redemption amount is $ 355.40, find the purchase price using the Makeham formula. Then check your answer using another price formula.
4. A fifteen-year bond, which was purchased at a premium, has semiannual coupons. The amount for amortization of the premium in the second coupon is $ 977.19 and the amount for amortization of premium in the fourth coupon is $ 1,046.79. Find the amount of the premium.
5. A three-year $1,000 6 % bond with semiannual coupons has redemption amount $ 1,040. Make amortization tables for this bond if it is bought to yield a nominal rate of 5% convertible semiannually. Repeat for a nominal rate of 6% and then for a nominal rate of 7%, each convertible semiannually.
“30/360” method for counting days. Still working on a “30/360” basis, find her annual yield rate ej and theoretical clean price CTej
9. An n-year $ 1,000 par-value bond with 8% annual coupons has an annual effective yield of i, 1 + i > 0. The book value of the bond at the end of the third year is $ 990.92 and the book value of the bond at the end of the fifth year is $995.10. Find the price of the bond.
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