What is value of an investment that pays every other year

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Reference no: EM13333935

1) Las Paletas Corporation has two different bonds currently outstanding. Bond M has a face value of $10,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,200 every six months over the subsequent eight years, and finally pays $1,500 every six months over the last six years. Bond N also has a face value of $10,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 6 percent compounded semiannually.
What is the current price of bond M and bond N?

2) You want to buy a new sports car from Muscle Motors for $88,000. The contract is in the form of a 48-month annuity due at a 7.75 percent APR. What will your monthly payment be?

3) What is the value of an investment that pays $48,000 every other year forever, if the first payment occurs one year from today and the discount rate is 18 percent compounded daily?
b) What is the value today if the first payment occurs four years from today?

Ninja Co. issued 11-year bonds a year ago at a coupon rate of 8.3 percent. The bonds make semiannual payments. If the YTM on these bonds is 6.6 percent, what is the current bond price?

5) You have 39 years left until retirement and want to retire with $3.7 million. Your salary is paid annually, and you will receive $54,000 at the end of the current year. Your salary will increase at 4.2 percent per year, and you can earn a 12.2 percent return on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year?

6) Rust Bucket Motor Credit Corporation (RBMCC), a subsidiary of Rust Bucket Motor, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, RBMCC promised to repay the owner of one of these securities $100,000 on March 28, 2039, but investors would receive nothing until then. Investors paid RBMCC $24,299 for each of these securities; so they gave up $24,299 on March 28, 2008, for the promise of a $100,000 payment 31 years later.

Suppose that, on March 28, 2018, this security's price is $42,580. If an investor had purchased it for $24,299 at the offering and sold it on this day, what annual rate of return would she have earned?

Reference no: EM13333935

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