Microsoft Word - 10002-Assignment 1 (Sem 1, 2017).docx

1. 1.You are thinking about buying a rare collectible that costs $50,000. The dealer is proposing the following deal. She will lend you the money and you will repay the loan by making the same payment every two years for the next 20 years. If the interest rate is 4% p.a. compounded annually, the amount you will have to pay every two years is closest to:
2. 2.has just issued a coupon growth bond with the following terms. Each bonds face value is $1,000 and the bonds will mature in 5 years time. Coupons will be paid on an annual basis at the end of each year. The first years coupon will be $100 which will then grow at an annual rate of 10% until the bonds mature. If the bonds yield to maturity is 8% per annum, its price today should be closest to: