Question #152578

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.

Expert's answer

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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