Revision as of 22:37, 19 November 2023 by Admin (Created page with "'''Solution: B''' Let <math>r_A</math> represent the coupon rate of bond <math>\mathrm{A}</math>. The coupon rate of bond <math>\mathrm{B}</math> is then <math>r_A+0.005</math>. From the given information, <math display="block"> \begin{aligned} & 3000=1000\left[\frac{1}{(1.07)^{30}}+r_A a_{\overline{30} \mid 0.07}+\frac{1}{(1.07)^{30}}+\left(r_A+0.005\right) a_{\overline{30} \mid 0.07}\right] \\ & 3=\frac{2}{(1.07)^{30}}+2 r_A a_{\overline{30} \mid 0.07}+0.005 a_{\over...")
Exercise
ABy Admin
Nov 19'23
Answer
Solution: B
Let [math]r_A[/math] represent the coupon rate of bond [math]\mathrm{A}[/math]. The coupon rate of bond [math]\mathrm{B}[/math] is then [math]r_A+0.005[/math]. From the given information,
[[math]]
\begin{aligned}
& 3000=1000\left[\frac{1}{(1.07)^{30}}+r_A a_{\overline{30} \mid 0.07}+\frac{1}{(1.07)^{30}}+\left(r_A+0.005\right) a_{\overline{30} \mid 0.07}\right] \\
& 3=\frac{2}{(1.07)^{30}}+2 r_A a_{\overline{30} \mid 0.07}+0.005 a_{\overline{30} \mid 0.07} \\
& 3=0.26273+24.81808 r_A+0.06205 \\
& r_A=\frac{3-0.26273-0.06205}{24.81808}=0.1078=10.78 \%
\end{aligned}
[[/math]]
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