EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 14A.5, Problem 1MQ
To determine
Actual value of
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Chapter 14A Solutions
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- A five-year bond with a yield of 11% (continuously compounded) pays an 8% coupon at the end of each year. a) What is the bond’s price? b) What is the bond’s duration? c) Use the duration to calculate the effect on the bond’s price of a 0.2% decrease in its yield. d) Recalculate the bond’s price on the basis of a 10.8% per annum yield and verify that the result is in agreement with your answer to (c).arrow_forwardHow can we determine the real (inflation-free) rate of return for a bond?arrow_forwardCalculate the present value of an annuity with monthly deposits of $2,000 at 5% for 20 years. Discuss how the present value of an annuity will change if the deposit is doubled?arrow_forward
- could you show how to determine the bond's present value without a calculator?arrow_forwardA discount interest loan is a loan arrangement where the interest and any other related charges are calculated at the time the loan is closed. Suppose a one-year loan is stated as $10,000 and the interest rate is 14%. Then, the borrower pays $1,400 interest up front, thereby receiving net funds of $8,600 and repaying $10,000 in a year. What is the effective interest rate on this one-year loan?arrow_forwardIf a one year discount bond that pays $1000 at maturity, is held for the entire year ,and the purchase price is $950 ,then the interest rate is... %arrow_forward
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