A bond has a par value of 20,000 and matures at par value at the end of 10 years. Calculate the present value if the investor seeks to earn interest at 5 percent effective and

16. a) The bond is a zero coupon bond.

16. b) The bond is an accumulation bond that earns 2 percent interest, converted annually. (no coupons)

17. a) The bond pays a 3 percent coupon rate, annually .

17. b) The bond matures at 22000 (instead of at par) and pays a 3 percent coupon rate, annually.

18 [10] Write out an amortization schedule for the bond described in 17 (a) which gives the book value at the end of each year (after coupon payment) and well as: the theoretical dirty value at the end of each half year and the theoretical clean value at the end of each half year (I suggest using a spreadsheet)

19. a) Now suppose the 20,000 dollar bond pays coupons at 10 percent (annually) and the investor wishes to earn 7 percent interest.

a. Suppose the investor can invest the coupon income at 7 percent interest. What is the price of the bond? Write out an amortization schedule that gives the book value at the end of each year.

b. Now suppose the investor amortizes the bond premium by a sinking fund that pays 5 percent interest (instead of getting 7). What is the new price of the bond? Write out an amortization schedule that gives the book value at the end of each year.