Answer to Question #152578 in Finance for Chelsea Camilla

Question #152578

Suppose that the market interest rate is 5%. Calculate the present value of the following. Show how your answer is obtained.i. A coupon bond with an annual coupon payment of $135 and a face value of $1500 that matures in five years.
ii. A discount bond with a face value of $5000 that matures in one year.
iii. A fixed payment loan with annual payments of $163 that matures in three years.

1
Expert's answer
2020-12-29T15:48:24-0500

i. A coupon bond with an annual coupon payment of $135 and a face value of $1500 that matures in five years.

Present value of annuity factor:

n = period

γ = rate of interest

n = 5

γ = 0.05

Present value factor:

Present value of bond

ii. A discount bond with a face value of $5000 that matures in one year.

n = 1

γ = 0.05

iii. A fixed payment loan with annual payments of $163 that matures in three years.

n = 3

γ = 0.05

Present value of loan


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