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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
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
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### 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%**
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.
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.
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