Problem 2. Refer to problem number one. If Mala Inse Corp. sells the bonds after holding it for two years, how much should Mala Inse sell the bonds at P5,000 above the said bond price? Solution: 2

a. Assuming you purchased the bond for $350 what rate of return would you earn if you held the bond for 25 years until it matured with a value $1000? a. Rate of return____% b. Suppose under the terms of thebond you could redeem the bond in 2024. DMF agreed to pay an annual interest rate of 1.4 percent until the date. How much would the bond be worth at that time? b. Bond value_____ c. In 2024 instead of cashing in the bond for its then current value you decide to hold the bond until it mature in 2043. What annual rate of return will you earn over the last 19 years? c. Rate of return___%

Vi (H X.) 25) A credit market instrument that pays the owner a fixed coupon payment every year until the maturity date and then repays the face value is called a A) fixed-payment loan. C) simple loan. B) coupon bond. D) discount bond. 25) Pr

How would you solve these using a financial calculator?   What values would you enter for N, I/YR, PV, PMT, and FV? *assume corporate bonds pay 2x annually and have a FV on $1000 *MACRS table attached a) Calculate the YTM of a 20-year corporate bond with a market price of $1,020, interest rate of 4.5% with 15 years left to maturity.  [YTM   b) What is the MACRS depreciation for a 5-year property asset purchased for $50,000 in the 2nd year?

Suppose the U.S. Treasury offers to sell you a bond for $687.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?

Question 2 a) State the relationship between present value and interest rate.  b) A bond pays $1,500 at the end of each year for five years, plus an additional $2,000 when the bond matures at the end of five years. What is the most you would be willing to pay for this bond if your opportunity cost of funds is 5 percent?  Please answer both otherwise I will dounvote

Exercises. 1. Three 2-year bonds have the following cash flows and prices: A. (2,3), PA = 2.5 B. (3, 4), PB = 3.6 C. (4,5), Pc 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity? 2. Three 4-year bonds have the following cash flows and prices: A. (2, 2, 2, 3), PA = 2.5 B. (3, 3, 3, 4), PB = 3.6 C. (4, 4, 4, 5), Pc = 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity?

Q1. Suppose Salalah international Co. issues bonds in Muscat security Exchange. The face value of bond is 5000 OMR and pays 4 percent interest rate.These bonds will mature in 4 years, and the yield to maturity is 7 percent. A. Calculate the interest payment generated by bond B. Calculate the fair value for this bond.

B2. Corporate Bonds (Answer all parts of this question.) Suppose you have a 6% coupon bond that matures in 1 year from now. The principal is 1,000. The bond currently trades at 900. Assume that the risk-free rate is at 2%. (a) (b) (c) (d) (e) How large is the risk premium? How much would it cost you to insure this bond against default today? What is the expected cash flow Eo [CF₁]? What is the probability of default p? Show that the expected profit from selling insurance against default is 0.

Q1) He Omani Company has two bond issues outstanding. Both bonds pay OMR (100) annual interest plus OMR (1000) face value at maturity. Bond L has a maturity of 15 years, sell after three years issued, and Bond S has a maturity of 1 year. A. What will be the value of each of these bonds when the going rate of market interest is 12%? B. what can you conclude from the results of the above questions regarding the bond risks?