Calculate the nominal interest rate

Assignment Help Finance Basics

Reference no: EM131951556

Question: Calculate the present value of a bond that pays a coupon rate of 4% per year for 15 years, and matures in 15 years at its face value of $1000, using each of the following current market interest rates as the discount rate:(a) 2%; (b) 4%; (c) 7%. Show your calculations. The course textbook provides a present discounted value factor table (PVF, i, n) in Appendix C and a present discounted value factor for an annuity (PVFA, i, n) in Appendix E (Titman et al., 2011, p. A-15 and p. A-19). The 4% coupon rate provides an annuity income of $1000 x .04 = $40 per year until the bond matures in 15 years; then the bond can be surrendered at maturity for its face value. The bond's coupon rate is also called its nominal interest rate.

a) Discount rate at 2% PV = A ( PVFA, i, n) + (Surrender value)

Reference no: EM131951556

Questions Cloud

Compute the present value of the annuity streams : Calculate the present value of the following annuity streams: $4,000 received each year for 4 years on the first day of each year if your investments pay.

How do you define quality on a project : How do you define quality on a project? Which tools and techniques do you think are a necessity for planning a project's quality management?

Calculate and plot the levelized cost of energy : Calculate and plot the levelized cost of energy (LCOE) as a function of the debt rate for 4% lessthanorequalto i_debt lessthanorequalto 12%.

Patient interaction as well as patient education : What do you think are some of the most prevalent personal attitudes and biases seen today and how have they effected the process of patient interaction

Calculate the nominal interest rate : Calculate the present value of a bond that pays a coupon rate of 4% per year for 15 years, and matures in 15 years at its face value of $1000.

What challenges does emirates airlines : Are the internal resources valuable, rare, difficult to imitate, or difficult to substitute ( VRIN) to help Emirates Airlines sustain a competitive advantage?

What were the null and alternative hypotheses : What were the null and alternative hypotheses? Were the results of this test statistically significant? If so, why were they significant?

What is the difference between theory and model : What is the difference between theory and model? Why and how the particular model you selected would be effective in promoting a "Clean Water"

Objectives and distribution arrangements : Discuss the Place objectives and distribution arrangements that are appropriate for the following products.

User Account

All Pages