PRESENT VALUE AND BOND VALUATION essayI began this project however am not in a position to full it. Need assistance whereas I work on my different assignments.
FIN301 Module 2 – Case 2
PRESENT VALUE AND BOND VALUATION
This project is in a distinct course than your Module 1 Case in that it's principally computational in nature. Earlier than beginning this project, work via among the examples within the background readings to be sure you perceive all the steps concerned in future worth and current worth, together with use of current worth formulation to compute the worth of a bond. Case Task
Please obtain the Case 2 Template. You'll kind your solutions into this doc. Save the doc together with your final title and undergo the dropbox. Be aware that you're going to get partial credit score when you present your work even when the solutions are incorrect.
1. Compute the longer term worth for the next:
a. $2,000 after being invested for 2 years in a financial savings account with three% rate of interest
b. $5,000 after being invested for ten years in a financial savings account with a 1% rate of interest
c. $three,500 after being invested for 9 years in a financial savings account with an 11% rate of interest
2. Compute the current worth for the next:
a. $three,000 to be paid in a single 12 months with a 9% low cost charge
b. $three,000 to be paid in three years with a 9% low cost charge
c. $four,000 to be paid in ten years with a 5% low cost charge
three. Compute the current worth for the next:
a. An funding that may pay you $1,000 in a single 12 months, one other $1,000 in two years, and a 3rd fee of $1,000 in three years (e.g., three funds of $1,000 to be paid yearly for 3 years). The low cost charge is four%.
b. The identical three $1,000 funds as partially a) above, however with a 6% low cost charge
c. An funding that may pay you $2,000 in a single 12 months, one other $1,500 in two years, and a 3rd fee of $three,000 in three years. The low cost charge is four%.
four. Compute the worth of the next bonds assuming a three% low cost charge (required charge of return):
a. A zero-coupon bond that pays $1,000 in 5 years
b. A bond that pays $1,000 in 5 years, with 5 annual coupon funds of $20 every
c. What's the coupon charge if coupon funds are $20 per 12 months? At what low cost charge would the worth of the bond be “at par” (e.g., be price $1,000?). Clarify your reasoning.
5. This a part of the project is only conceptual with no computations required. Clarify the next with references to the required readings:
a. What's more likely to occur to rates of interest if the speed of inflation abruptly will increase?
b. Suppose there are two bonds every with coupon funds of $50. The primary bond pays $1,000 in 5 years, and the opposite one pays $1,000 in ten years. If rates of interest elevated, would the worth of the bonds improve or lower? Which of the 2 bonds would have their worth change extra after the rise in rates of interest? Clarify your reasoning.
Reply the project questions instantly.
• Keep centered on the exact project questions. Don't go off on tangents or commit numerous area to summarizing basic background supplies.
• For computational issues, ensure that to indicate your work and clarify your steps.
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