ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Suppose that a 2-year zero-coupon bond with face value $1,000 currently sells at $840, while a 1-year zero-coupon bond with face value $1,000 currently sells at $920. You are considering the purchase of a 2-year coupon bond that pays coupon annually. The face value of this coupon bond is $1,000 and coupon rate is 12% per year. Required: a. What is the yield to maturity of the 2-year zero-coupon bonds? b. What is the current price of the 2-year coupon bond? c. What is the forward rate of the second year? d. If the expectation hypothesis is accepted, what are (1) the expected price of the coupon bond at the end of the first year and (2) the expected holding period return on the coupon bond over the first year? e. Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis?arrow_forwardA company has issued a 20 year bonds, with a face value of $50,000 interest at 8% is paid quarterly. If an investor desires to earn 12% compounded quarterly, what would be the purchase price of the bond? $12, 654.40 $42, 563 $35, 062.60 $ 34, 900.80arrow_forwardA $1000 face-value coupon bond has a current yield of 5.75% and a market price of $1060. What is the bond’s coupon rate?arrow_forward
- The real risk free rate is 3.3%. Inflation is expected to be 3.05% this year, 4.05% next year, and 2.1% thereafter. The maturity risk premium is estimated to be 0.05 x (t-1), wheret - number of years to maturity. What is the yield on a 7-year Treasury note?arrow_forwardThree months ago, Jim purchased $11,000 of U.S. Treasury bonds. These bonds have a 30-year maturity period, and they pay dividends every three months at an APR of 17%. However, today's interest rates for similar securities have risen to a (17+1)%APR (compounded quarterly). In view of the interest-rate increase to (17+1)%, what is the current value of Jim's bonds today?arrow_forwardPlease answer very soon will give rating surelyarrow_forward
- 1arrow_forwardMany retirement funds charge an administrative fee equal to 0.25% on managed assets. Suppose that Alexx and Spenser each invest $4,000 in the same stock this year. Alexx invests directly and earns 4% a year. Spenser uses a retirement fund and eams 3.75%. If Alexx and Spenser leave their investments in place for 30 years, with annual compounding of the interest, how much more will Alexx have than Spenser at the end of the 30-year period? Alexx will have more than Spenser after 30 years. (Enter your response rounded to two decimal places.)arrow_forwardConsider a 30-year US corporate bond paying 4.5% coupon. The bond is currently priced at $958. Find its yield to maturity. Express your answers as a percentage Please give correct answer sirarrow_forward
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