time value of money: bonds?
I have a QCM to do about time value of money and I don't understand at all... Can you please guys help me? Thank you!
Sam is a lucky student. Hi dad, mum, and grandpa have decided to give him money
because he is studying. His dad will give him $200 every week for the coming 4 years.
His mum will give him $300 every 2 weeks for the coming 4 years. His grandpa will give
him $400 every month for the coming 4 years. If the current discount rates are 3.6% APR
compounded monthly. What is the current value of the total amount of money that Sam
will be receiving in the coming four years?
I made some calculations but couldn't find the right answer. i'm pretty sure it's D or E.
You are planning to retire 40 years from now. Once you retire you will be withdrawing
$60,000 at the beginning of every year and for another 40 years. To make your
retirement plans and for the coming 40 years, you will start depositing at the end of
every year a certain amount of money in your bank account. Since you are expecting
that your salary will grow by 1% every year for the coming 40 years than you expect
your yearly savings to grow by the same rate. If your bank is paying you 6% APR
compounded monthly. What should be your first deposit so that you can achieve your
I don't know how to do this one as well. My calculations don't match, I find around $6,000.
ABC Corporation issued 10-year bonds at a price of $1,000 (par value = $1,000). The
coupon rate on the bond is equal to 10%. Coupons are paid semi-annually. Suppose that
you have purchased ABC bonds when it was issued, kept for three years, and then sold it
for $850. Noting that you have invested the coupons given by ABC Company in the
period you were holding it in a bank at 6% APR compounded semi-annually. What is the
effective annual rate you have achieved on your investment?
I don't know why the answer would be negative but since I have no idea how to find the effective rate of a bond.
14. Last year ABC Company has issued a 10 year bonds at a par. The bonds coupon rate is
10% and it is paid semiannually. The price of the bond now is $950. The company is in
need of $5,000,000 in additional money today and is planning to issue new bonds
whose maturity is 9 years, coupon rate is 5%, par value equal to $1,000, paying semiannual
coupon. How many bonds company ABC needs to issue (pick the nearest
E. None of the Above
5 years ago ABC Company has issued a 15 years bond at face value ($1,000). The bond
has a coupon rate of 8% and pays semi-annual coupons. Six months ago, you have
purchased ABC bond for $900. Today you have sold your ABC bond achieving a -5%
return on your investment. What is the bond yield to maturity currently?
2 years ago Company XYZ had issued 10-year bonds at par. The coupon rate is equal to
10% and coupons are paid semi-annually. Today XYZ is lacking liquidity and is on the
edge of bankruptcy. However, they believe that they can fix their financial problems in
two years from now. As such, creditors have agreed to give Company XYZ a grace period
of two years in which no coupons are given to investors. The remaining coupons will be
distributed as scheduled. The postponed coupons will accrue interest at a 6% APR
compounded semi-annually and will be distributed to investors at the maturity of the
bond instead. The YTM of the bond is 20%. What is the price of XYZ Bond today?
Stocks) Company ABC has just paid dividend of $50. ABC dividends growth rate is
expected to be equal to 5% for the coming 5 years, 10% for the next 5 years, and 2%
thereafter. What is the price of ABC stock today if the required rate of return on ABC’s
equity is 10%?
Can you please guys explain to me how to deal with those questions? I really need to understand how it works! Thx!
- 8 years agoFavorite Answer
OK that's a tough one. I'll get back to it later!! Hang on..
- 5 years ago
It depends on what you are in and what your goals for investing are. It additionally depends on what your personal chance philosophy is. In the event you would give some more expertise, that may be first rate. Right off the bat, don't contact money markets. If you're watching for someplace risk-free to cover you cash, appear into T-bills. Money Market debts generate interest on the grounds that the bank or Brokerage swimming pools the cash collectively right into a huge account and invests in industrial Paper (corporate Bonds) with a constant percentage allocated toward Junk Bonds (as they have a better curiosity price). For those who havent noticed, the entire Debt Securities Market is frozen, so this leaves restrained entry for these money owed...Or, possible default for these money owed. I might keep off for a couple years on cash Markets for certain. A former co-worker of mine did not suppose me, reason she use to work in a credit score Union and thought she knew the whole thing (i suppose my 7 & 66 are just for the show)...And now she is consuming crow. Followup with us on what your objectives are. When you plan on drawing out money for retirement (as 6 figures isn't enough to retire). What is the allocation percentages with your account. Additionally, in case you have person shares, how long have you had them? What are they? Specifics are very vital right here, as all people thus far ahs advised you. By the way, i'd restrict Gold. Its a moron's waste. If you're watching into commodities, i would use nickel. There is a finite give and it's the principal metal for steel alloy...Which the worldwide economic climate is booming with all these emerging markets, so infrastructure shares are sizzling...And so too is Nickel, purpose you cannot have metal without nickel. ----------------- what businesses do you possess?