Samantha put $18,500 into a savings account. after one month, the savings account grew to $18,962.50. after the second month, it
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You did not post the complete question so I will write only the missing components below that is needed to answer the question and some important definitions.
Definitions:
PVIFA - present value interest factor of annuity
= number of regular intervals per year at which time the borrowed amount is to be paid back
= annual interest rate
= number of years to payoff the debt
We need to find the interest rate that equates the price we paid for the bond with the cash flows we received. The cash flows we received were $100 each year for two years and the price of the bond when we sold it. Also, remember the YTM on the bond has declined by 1 percent.
Let us assume a par value of $1,000. we need to find the price of the bond in two years. The price of the bond in two years, at the new interest rate, will be:
$100(PVIFA8.42%,17) + $1,000(PVIF8.42%,17) = $1,139.69
Answer:
Therefore, the bond will sell for $ 1,139.69 ± 0.1%
At the current interest rate of 6.5%, the bonds will mature in 12 years.
CALCULATIONS:
RATE= 6.5%
PMT= 1000$*6% = 60$
PV= 959.21$
FV= 1000$
NO. OF YEARS TO MATURE= NPER(rate, pmt, -pv,fv,0)
=NPER(6.5%,60$,-959.21$,1000$,0)
=12 YEARS
A coupon bond, also known as a bearer bond or bond coupon, is a debt obligation that includes semiannual interest coupons. The issuer keeps no record of coupon bond purchasers, and the purchaser's name is not printed on any kind of certificate. Between the time the bond is issued and the time it matures, bondholders receive these coupons.
Coupons are typically described in terms of the coupon rate, which is the yield paid on the date of issuance by a coupon bond. The interest rate on the coupon is subject to change. The coupon rate is calculated by adding all of the annual coupons and dividing the total by the bond's face value.
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