Question
A). Wanda and Vision are looking into retiring and settling for a home. They would like to see what the future value of a $7,500
A). Wanda and Vision are looking into retiring and settling for a home. They would like to see what the future value of a $7,500 annuity payment would be, paid over seventeen years, if the annuity earns a 10.5 percent interest rate.
Calculate what the amount is. (Show your work) (If using the business calculator or excel spreadsheet, show the function buttons and the amounts)
B). Wonder Woman holds a Bond that has a $1,000 par value, it has 16 years to maturity, and the annual coupon rate is at 9.5%, that sells for $1,080.
(Answer the following two questions) (Show your calculations) (If using the business calculator, show the function buttons and the amounts).
- What is its yield to maturity (YTM)?
- Assume that the yield to maturity remains constant for the next five years. What will the price be 5 years from today?
(Hint, you will need to discount the remaining years from the original maturity time and plug in the YTM from the previous question)
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