Group 4:

● Anissa Dian Setyarani Wokas (20/470892/PEK/26619)

● Firza Syafira (20/470938/PEK/26665)
● Puspita Ramadhania (20/471001/PEK/26728)
● Raveena Fiarani (20/471005/PEK/26732)

Assignment 2

Chapter 4

(4-5) You have $42,180.53 in a brokerage account, and you plan to deposit an
additional $5,000 at the end of every future year until your account totals
$250,000. You expect to earn 12% annually on the account. How many years will
it take to reach your goal?
Finish using Excel formula, put this formula next to NPER cell:
“=NPER(B1;B2;B3;B4;B5)”

The result shows that NPER value is 11,00. Therefore it can be conclude that it takes 11
years for John to accumulate $250,000
(4-19) Universal Bank pays 7% interest, compounded annually, on time deposits.
Regional Bank pays 6% interest, compounded quarterly.
A. Based on effective interest rates, in which bank would you prefer to deposit
your money?
B. Could your choice of banks be influenced by the fact that you might want to
withdraw your funds during the year as opposed to at the end of the year? In
answering this question, assume that funds must be left on deposit during an
entire compounding period in order for you to receive any interest.

a. Based on the calculation using the equation of Effective (or Equivalent) Annual
rate (EAR or EFF%) given below, the bank that would be preferred to deposit
money is the Universal Bank that pays 7% interest compounded annually
compared to the Regional Bank which pays 6% interest compounded quarterly.

I N OM M
EAR = EFF% = (1 + M
) - 1.0

- Universal Bank, 7% interest, compounded annually

7% 1
EAR = (1 + 1
) - 1.0
EAR = 7%

- Regional Bank, 6% interest, compounded quarterly

6% 4
EAR = (1 + 4
) - 1.0
EAR = 6,14%

b. The choice of the bank would absolutely change if the money would be
withdrawn during the year, not at the end of the year. If that is the case, the
chosen bank will be the Regional Bank since it is compounded quarterly. When
the money is taken out after only 4 months of the compounding period, there still
will be interest earned compared to if the funds are deposited at the Universal
Bank, there won’t be interest gained since they only compound one time at the
end of the year.
(4-20)
A. Set up an amortization schedule for a $25,000 loan to be repaid in equal
installments at the end of each of the next 5 years. The interest rate is 10
percent.
B. How large must each annual payment be if the loan is for $50,000? Assume
that the interest rate remains at 10 percent, and that the loan is paid off over
5 years.
C. How large must each payment be if the loan is for $50,000, the interest rate is
10 percent, and the loan is paid off in equal installments at the end of each of
the next 10 years? This loan is for the same amount as the loan in part b, but
the payments are spread out over twice as many periods. Why are these
payments not half as large as the payments on the loan in part b?

a. PV = 25,000

N=5

I = 10%

Calculating PMT using excel formula: =PMT(B3,B2,B1,0)

PMT = $6,594.94

Now, set the amortization schedule:

b. PV = 50,000

N=5

I = 10%

Calculating PMT using excel formula: =PMT(B3,B2,B1,0)

PMT = $13,189.87

c. PV = 50,000

N = 10

I = 10%

Calculating PMT using excel formula: =PMT(B3,B2,B1,0)

PMT = $8,137.27
 Reasons why these payments not half as large as the payments on the loan in
part b:

● Because the payments are spread out over a longer time period, more principal
must be paid on the loan, which raises the amount of each payment.
● Because the payments are spread out over a longer time period, less interest is
paid on the loan, which raises the amount of each payment.
● Because the payments are spread out over a longer time period, less interest is
paid on the loan, which lowers the amount of each payment.
● Because the payments are spread out over a shorter time period, more interest
is paid on the loan, which lowers the amount of each payment.
● Because the payments are spread out over a longer time period, more interest
must be paid on the loan, which raises the amount of each payment.

Chapter 5

(5-12) A 10-year, 12% semiannual coupon bond with a par value of $1,000 may be
called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that
the bond has just been issued.)
A. What is the bond’s yield to maturity?
B. What is the bond’s current yield?
C. What is the bond’s capital gain or loss yield?
D. What is the bond’s yield to call?

Answer:
a. Excel formula for yield to maturity is
YTM/n =RATE(nper;pmt;pv)
Nper = total number of periods of the bond maturity. Years to maturity of the bond is
4 years, buy coupons per year is 10, nper is 4x10 = 40
Pmt = The payment made in every period. The coupon rate is 12% but as payment is
done 10x a year, the coupon rate for a period will be 12%/10*$1000 = 10

YTM = YTM/n * Coupons Per Year

 Calculating YTM/n using excel formula: =RATE(E5;E4;-B8;B4)

Calculating YTM using excel formula: =E6*B6

b. Formula for Current Yield is = Annual Coupon Payment/Current Price of Bond

And the Formula of Annual Coupon Payment is = Coupon Rate x Par Value of Bond

So, Excel formula for

1. Annual Coupon Payment =B3*B4
2. Current Yield =B6/B5

c. The excel formula for the bond’s capital gains is

Capital gains yield = =(((PV(B4;B3-1;B6*B7;B6))/-B5)-1)

d. Excel formula for yield to maturity is
YTC/n =RATE(nper;pmt;pv)
YTC = YTC/n * Coupons Per Year
Calculating YTC/n using excel formula: =RATE(E5;E4;-B8;B4)
Calculating YTC using excel formula: =E6*B6

(5-16) A bond trader purchased each of the following bonds at a yield to maturity of
8%. Immediately after she purchased the bonds, interest rates fell to 7%. What
is the percentage change in the price of each bond after the decline in interest
rates? Fill in the following table:

Price @ 7% Percentage
Price @ 8%
Change

10-year, 10% annual coupon

$1.134,20 $1.210,71 6,75%

10-year zero
$463,19 $508,35 9,75%

5-year zero
$680,58 $712,99 4,76%

30-year zero
$99,38 $131,37 32,19%

$100 perpetuity
$1.250,00 $1428,57143 14,29%

One of the key characteristics of bonds is Par Value. Par value is the stated face value
of the bond and generally represents the amount of money the firm borrows and
promises to repay on the maturity date. Here we assume a par value of $1000 and try
to finish using Excel:

Excel formula for maturity 8% and 7%:​ “=PV(interest rates;-nper;-pmt;fv)”

Excel formula for $100 perpetuity:​ “= interest rates/$100 perpetuity”

Excel formula for percentage change: “=(result from 7% maturity-result from 8%

maturity)/result from 8% maturity”