

Subject:
Finance
Category: Business and Money Asked by: pbc141ga List Price: $2.00 
Posted:
22 Mar 2005 12:01 PST
Expires: 21 Apr 2005 13:01 PDT Question ID: 498708 
What is the present value of a 10year, pure discount bond that pays $1,000 at maturity and is priced to yield the following rates? a. 5 percent b. 10 percent c. 15 percent 

Subject:
Re: Finance
Answered By: markjga on 22 Mar 2005 14:49 PST 
pbc141  The answer for 5 percent is $613.91 The answer for 10 percent is $385.54 The answer for 15 percent is $247.19 The exact problem you have posed is solved on this linked page from economics text material on the website at the University of California at Santa Barbara (The superscripted "10" in formula refers to the number of years until maturity): University of California at Santa Barbara: Chapter 5: How to Value Bonds and Stocks http://www.econ.ucsb.edu/~sparendo/134a/ch5.pdf You can confirm the answer and probably get more familiar with the relevant formula with this linked mortgage/bond calculator: Econmodel: Mortgage/Bond Calculator http://www.econmodel.com/classic/calculators/pv1.php To get your answer for each of your interest rates, do the following: 1. Insert the interest rate ("5", for example) in the box labeled "R" 2. Insert "10" in the box labeled "N" (which refers in this case to the "Number" of years until maturity: 3. Insert "1000" in the box labeled "B" 4. Leave the "A" box empty and click on "PV" (for "Present Value") Search Strategy: The following Google search was the most useful in finding these two information sources: "pure discount" bond "present value" ://www.google.com/search?hl=en&lr=&rls=GGLB%2CGGLB%3A196953%2CGGLB%3Aen&q=%22pure+discount%22+bond+%22present+value%22 I am confident that these are the answers you are looking for. If anything is unclear or if you have any problem with the links, please ask for clarification before rating the answer. markjga 

There are no comments at this time. 
If you feel that you have found inappropriate content, please let us know by emailing us at answerssupport@google.com with the question ID listed above. Thank you. 
Search Google Answers for 
Google Home  Answers FAQ  Terms of Service  Privacy Policy 