THQ 2 7 Ps (= 3.51% 99000 P = 3.514. 100000 yolala o ( days ) 98300 74 180 Purchase Yield = 100000 - 98300 365 98300 180 = 0 .03507 = 3.507% H . = 3 . 5 17. Sale Yield = 99000 - 98300 365 98300 74 = 0 .035 12 23 517 The lower yield will cause a higher price for George since there's on inverse relationship between sale yieds and bank bill prices. If George accepts the lower yield the the selling price will be between $ 100,000 and $99,000 but more than $9 9, ood on the 74 th day. iv . Sale Price of Bank-bill= $ 99, 000:00 Purchase Price of Bah -Bill= 98, 360.00 7% Interest for 74 day period 698.89.1 Gain / Loss on Investment Interest = 1700 * 74 180 = $698 89we assume that Youleads borrowed to purchase the bond the The break-even rate of interest on borrowing is 3.51% If the borrowing cost is greater than break-even point plus 10 basis points, Yolanda will end up with a : ( 3 61% ) Cash Surplus / Deficit = ((100000 + 3.61% - 100000 - 98300 ) $ 80 . 27397 $ 80 . 27 Cash Deficit b ) 5. 4 Max O 150 ( days ) Cp 25000 BOOOO Real Cost of Borrowing if fees and charges are paid on the date of issue # ( 10 000 - ( 10 000 x 5.4% x 180 365 + 25000 = $ 9733. 70 + $25000 =$ 34, 733.70 Real Cost of Borrowing =\fes 3 C dold Real! Cost of Borrowing if fees and charges are paid at maturity = $9 733 . 70 + 25000 - (10000- 9733.70) = $ 34, 467 .40 Real Cost of borrowing = ( 10ooo x 5.4% x 365 180 365 * (oo x 1 80 3 4 4 6 7 . 40 = 1 . 5667 /20 247 2 ) J2 = 3. 2%. 100 2.5 2.5 2.5 2.5 Clarrie 2c 27 O Half V -28 years 0:7560.75 0:75 0-75\fb Pq 4 1.67. 2.5 928 -+ 100 28 - 0.75 vg28 = $ 103. 890 Clarie 2.5 100 2.5 92 2.5 I 2 27 28 29 Half 35 Lyecs 075 $103. 950 0.75 0.75 0.75 10 .75 C . The price is higher in part bi because the tax payment Occurs a year later which ; more attractive for thestory purchase than in port a\f3 PS 6 a . Purchase Price of Bond = $100 Coupon Rate = 15% pa. Reinvestment Rate = 147 . p.G 15 43 + 100 v3 at 14% Reinvestment : lear 1 = 15 ( 1 + 0 .14 ) 2 = 19.494 Ver 2 =1 15 ( 1+ 0.14 ) 217 .1 Year 3 = 61 15 IS $ 5 1.594 T.A.V Total Proceedings/ A= $100+ $ 51 .594 = $15159 40.0 b . YTM = 18 . 6%. p. s. 18.6% 15 037 + 100 +3 2 Purchase , Price 0 15 1-186 , + 15 + 115 -1-1-86 ) ALL RATE S.92. 247 E $ 92 . 25 92 . 25 x (It ; ) = 151. 5940 (It:) = 151. 5940 = 1.64 3295 92 . 25 (1. 643295 -Interest on Coupons =$51: 594 - 45 = $6. 594 -ON Capital! Gash = $151 . 59 - 92125 = $59.34 d . HPY = Income + ( Redemption P - Purchase P) / Purchase P = 512594 +1 ( 100- 92.25 92- 25 ) 2062 +OPP = 64 . 3 29 5 % 20 . APP - = 64. 33 %. e 0 - 1 x 15 (1 + 0 . 186) + 2x 15 1+0. 186 - + 3 x 115 (1+ 0. 186) 3 $15 ( 1+0 186)' + 15 ( 1+0 186) 2+15 ( 1+0-186 )