Question
please show me calculation/workings try to solve all the three, i will be thankful 8. BLB Ltd has just issued a coupon growth bond with
please show me calculation/workings try to solve all the three, i will be thankful
8. BLB Ltd 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: a) $972. b) $1,080. c) $1,161. d) $1,275.
9. Consider a five-year bond with a face value of $1,000 paying annual coupons at a rate of 12% which has a current yield to maturity of 10%. If all interest rates remain unchanged, one year from today the price of this bond: a) Will be higher. b) Will be lower. c) Will be the same. d) Cannot be determined without additional information.
10. Your favorite aunty has finally agreed to contribute towards funding your retirement. Specifically, she will start with a contribution of $6,000 today (that is, end of year 0) but this amount will then decline at a constant rate of 3% p.a. over the foreseeable future. If the interest rate appropriate for valuing your auntys contribution is 12% p.a. its present value today is closest to: a) $38,800. b) $44,800. c) $56,000. d) $70,667.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started