A 10-year bond with the face value of s20,000 is the offer price ce value of s20

Question

A 10-year bond with the face value of s20,000 is the offer price ce value of s20,000 is offered for sale at $17,000 in the market. The nominal lculateth$17,000.ne bond is 8%, paídquarterly. This bord is now 5 years old. You are considering yar bond riveannual rate ofreturn within a 3% point range when you purchase it atsi,000 o the maturity S years hence. Is that offer price S17,000 acceptable? Your MARR is 5% per year. ( 10 points) $16,500 instead of $17,000. (10 points) e effective annual interestrate within a 3% point range if you purchase the bond at

Explanation / Answer

4)

a)

b)

1 Face value (FV) $                                     20,000 2 Coupon rate 8.00% 3 Number of compounding periods per year                                                    4 1*2/3 Interest per period (PMT) $                                     400.00 Bond price (PV) $                                  (17,000) 4 Number of years to maturity 5 5 = 4*3 Number of compounding periods till maturity (NPER)                                                 20 Effective annual interest rate RATE(NPER,PMT,PV,FV)*4 Effective annual interest rate 12.04%

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