Reference no: EM132796981
1. An investor borrowed KShs. 4 Millions for investment purposes at an interest rate of 12%. The loan is to be repaid within a period of eight years.
Using the Excel Software:
i. Compute the annual loan repayment
ii. Prepare the loan repayment schedule showing clearly the interest and principal repayment each year.
2. Suppose the investor is valuing an investment which promises $ 4 000 at the end of every year for the next 5 years. If a bank pays an annual interest rate of 10% per annum on a 5- year deposit, compute the Net Present Value of the expected cashflows of this investment by summing the individual present values, using NPV and PV Excel's Functions.
3. As a finance manager, you are required to value a bond which pays annual coupon with the following terms: Term to Maturity 10years Maturity value $10,000 Discount rate (required yield) 6% Annual coupon payment 8%
Required:
i. Fair price and duration of the bond by summing the discounting cash flows Using Excel
ii. Using the Excel function DURATION given the settlement and maturity dates are 3rd December 2018 and 3rd December 2028 respectively
iii. Giving the reason, comment whether the bond is selling at a premium or loss.
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