The Sisyphean Company has a bond outstanding with a face value of $5,000 that reaches maturity in nine years. The bond certificate indicates that the stated coupon rate for this bond is 8.3% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $5,561, then the YTM for this bond is closest to: OA. 5.3% OB. 9.28% OC. 7.95% OD. 6.63% ***
The Sisyphean Company has a bond outstanding with a face value of $5,000 that reaches maturity in nine years. The bond certificate indicates that the stated coupon rate for this bond is 8.3% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $5,561, then the YTM for this bond is closest to: OA. 5.3% OB. 9.28% OC. 7.95% OD. 6.63% ***
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Need help pls. Thank you!
Transcribed Image Text:### Bond Yield Question
The Sisyphian Company has a bond outstanding with a face value of $5,000 that reaches maturity in nine years. The bond certificate indicates that the stated coupon rate for this bond is 8.3% and that the coupon payments are to be made semiannually.
Assuming that this bond trades for $5,561, then the YTM (Yield to Maturity) for this bond is closest to:
- **A. 5.3%**
- **B. 9.28%**
- **C. 7.95%**
- **D. 6.63%**
![**Question:**
An annuity pays $49 per year for 16 years. What is the future value (FV) of this annuity at the end of those 16 years, given that the discount rate is 9%?
**Options:**
- A. $1,940.60
- B. $1,617.17
- C. $970.30
- D. $2,264.04
**Explanation:**
To solve this question, one would use the Future Value of Annuity formula, which calculates the future value of a series of equal payments at regular intervals, taking into account a specified interest or discount rate. The formula is:
\[ FV = P \times \frac{(1 + r)^n - 1}{r} \]
Where:
- \( P \) is the payment amount ($49),
- \( r \) is the interest rate (9% or 0.09),
- \( n \) is the number of periods (16 years).
By plugging in the values:
\[ FV = 49 \times \frac{(1 + 0.09)^{16} - 1}{0.09} \]
\[ FV = 49 \times \frac{3.6042 - 1}{0.09} \]
\[ FV ≈ 49 \times 28.9355 \]
\[ FV ≈ 2,264.04 \]
Therefore, the correct answer is D. $2,264.04.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3f8a7250-9137-47ef-be98-4b87422d4696%2F98d416b9-1eaf-4ace-9f99-5786eee65626%2Fybnr0hi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Question:**
An annuity pays $49 per year for 16 years. What is the future value (FV) of this annuity at the end of those 16 years, given that the discount rate is 9%?
**Options:**
- A. $1,940.60
- B. $1,617.17
- C. $970.30
- D. $2,264.04
**Explanation:**
To solve this question, one would use the Future Value of Annuity formula, which calculates the future value of a series of equal payments at regular intervals, taking into account a specified interest or discount rate. The formula is:
\[ FV = P \times \frac{(1 + r)^n - 1}{r} \]
Where:
- \( P \) is the payment amount ($49),
- \( r \) is the interest rate (9% or 0.09),
- \( n \) is the number of periods (16 years).
By plugging in the values:
\[ FV = 49 \times \frac{(1 + 0.09)^{16} - 1}{0.09} \]
\[ FV = 49 \times \frac{3.6042 - 1}{0.09} \]
\[ FV ≈ 49 \times 28.9355 \]
\[ FV ≈ 2,264.04 \]
Therefore, the correct answer is D. $2,264.04.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education