excans:534d0216b1: Difference between revisions
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(Created page with "'''Solution: C''' Since yield is less than the coupon rate, the purchaser paid a premium for the bond. The issuer wants to end the coupon payments as soon as possible. so we assume the bond will be called after 10 years. Take a period to be 6 months. Thus <math display = "block">\begin{aligned} P & =C v^{20}+F r a_{\overline{20} \mid}=1000\left(1.025^{20}\right)+35 a_{\overline{20 \mid} \mid .025} \\ & =1000\left(1.025^{-20}\right)+35 \frac{1-1.025^{-20}}{.025}=1155.89...") |
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Since yield is less than the coupon rate, the purchaser paid a premium for the bond. The issuer wants to end the coupon payments as soon as possible. so we assume the bond will be called after 10 years. Take a period to be 6 months. Thus | Since yield is less than the coupon rate, the purchaser paid a premium for the bond. The issuer wants to end the coupon payments as soon as possible. so we assume the bond will be called after 10 years. Take a period to be 6 months. Thus | ||
<math display = "block">\begin{aligned} P & =C v^{20}+F r a_{\overline{20} \mid}=1000\left(1.025^{20}\right)+35 a_{\overline{20 | <math display = "block">\begin{aligned} P & =C v^{20}+F r a_{\overline{20} \mid}=1000\left(1.025^{20}\right)+35 a_{\overline{20} \mid .025} \\ & =1000\left(1.025^{-20}\right)+35 \frac{1-1.025^{-20}}{.025}=1155.892\end{aligned}</math> | ||
'''References''' | '''References''' | ||
{{cite web |url=https://web2.uwindsor.ca/math/hlynka/392oldtests.html |last=Hlynka |first=Myron |website=web2.uwindsor.ca | title = University of Windsor Old Tests 62-392 Theory of Interest | access-date=November 23, 2023}} | {{cite web |url=https://web2.uwindsor.ca/math/hlynka/392oldtests.html |last=Hlynka |first=Myron |website=web2.uwindsor.ca | title = University of Windsor Old Tests 62-392 Theory of Interest | access-date=November 23, 2023}} | ||
Latest revision as of 15:29, 29 November 2023
Solution: C
Since yield is less than the coupon rate, the purchaser paid a premium for the bond. The issuer wants to end the coupon payments as soon as possible. so we assume the bond will be called after 10 years. Take a period to be 6 months. Thus
[[math]]\begin{aligned} P & =C v^{20}+F r a_{\overline{20} \mid}=1000\left(1.025^{20}\right)+35 a_{\overline{20} \mid .025} \\ & =1000\left(1.025^{-20}\right)+35 \frac{1-1.025^{-20}}{.025}=1155.892\end{aligned}[[/math]]
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.