Revision as of 16:54, 29 November 2023 by Admin (Created page with "A 1000 face value 20-year 8% bond with semi-annual coupons is purchased for 1014. The redemption value is 1000. The coupons are reinvested at a nominal annual rate 6%, compounded semi-annually. Determine the purchaser’s annual effective yield over the 20 year period <ul class="mw-excansopts"><li>6.9%</li><li>7.0%</li><li>7.1%</li><li>7.2%</li><li>7.3%</li></ul> '''References''' {{cite web |url=https://web2.uwindsor.ca/math/hlynka/392oldtests.html |last=Hlynka |firs...")
Nov 29'23
Exercise
A 1000 face value 20-year 8% bond with semi-annual coupons is purchased for 1014. The redemption value is 1000. The coupons are reinvested at a nominal annual rate 6%, compounded semi-annually.
Determine the purchaser’s annual effective yield over the 20 year period
- 6.9%
- 7.0%
- 7.1%
- 7.2%
- 7.3%
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
Nov 29'23
Solution: C
[math]1014(1+j)^{20}=1000+.04 * 1000 * s_{\overline{40} \mid .03}[/math] so
[[math]]j=\left(\frac{1000+40 s_{\overline{40} \mid .03}}{1014}\right)^{1 / 20}-1=.071243[[/math]]
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.