CH9-Inclass- Solution.

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Presentation transcript:

CH9-Inclass- Solution

Q. 12 1175 = 80(PVIFA ytm,15) + 1,000(PVIF ytm,15) YTM = 6.18%

Q.19 A. 80(PVIFA 7%, 20) + 1000(PVIF 7%, 20) = 1105.94 B. 80(PVIFA 10%, 20) + 1000(PVIF 10%, 20) = 829.73 80(PVIFA 6%, 20) + 1000(PVIF 6%, 20) = 1229.40 C. When YTMs are low, bonds’ prices are more interest-rate sensitive than when YTMs are high. D. When TTM are long, bonds’ prices are more interest-rate sensitive than when TTM are short. E. In all cases, when YTM falls, price rises. However, the effect is greater in percentage terms for the 20-year bond than for the 10-year bond.

Q.22 A. 85(PVIFA 9%, 15) + 1000(PVIF 9%, 15) = 959.70 B. 85(PVIFA 11%, 15) + 1000(PVIF 11%, 15) = $820.23. Or 85(PVIFA 7%, 15) + 1000(PVIF 7%, 15) = $1136.62, Buy when 7%.

Q. 4 and Q. 3 4. Vb = 120(PVIFA 14%, 15) + 1000(PVIF14%,5) = 895.67 3. at I =10% Va = 100(PVIFA 10%,20) + 1000(PVIF 10%, 20) = 1,000 Vb = 100(PVIFA 10%,10) + 1000(PVIF 10%, 10) At I = 8% Va = 100(PVIFA 8%,20) + 1000(PVIF 8%, 20) = 1196.36 Vb = 100(PVIFA 8%,10) + 1000(PVIF 8%, 10) = 1134.20