CHAP 4

BT1 PV = CF/(1+i)*n. Rate 5%: 99,594. Rate 10%: 99,20. => 5 worth
BT2 Present value and interest rate needs to take into consideration when deciding to receive $5,000 today or
$5,500 one year from today.
BT3 Must be less than 12% because at 12% the loan value is 988
and will less if the rate is higher.

BT4 Bondholders fare better when the yield to maturity decrease because it increases the prices of the bonds.

BT5
The rate of capital gain is the part of the rate of return formula that incorporates future
changes in the price of the bond.
BT6 As mortgage rates go up, it raises the cost of buying a home with a mortgage
BT7 The current yield will be a good approximation to the yield to maturity whenever the bond price is very
close to par or when the maturity of the bond is over about ten years.
BT8 Governments choose to give perpetuities instead of fixed payments or terminal loans with the focus of
cash flows in the future because the future cash flows would have lower discounted values than the
current value.
BT9
1100/1.1 =>1000. 1210=>1100. 1210=>1331
BT14 1100/1.1 =>1000. 1210=>1100. 1210=>1331
BT15 PV = Face value /(1+0.06)*5 = 747,26
BT16 Dùng fixed payment

BT17 Treasury bills - No. In normal times banks will not choose to pay more than the face value of a discount
bond, since that implies negative yields to maturity. PV = CF/(1+i)*n => 5012=5000/(1+x) => x = -2.4%
BT18 PV = CF/(1+i)*n => 1m=2m/(1+x)*5 => x = 0.1486%
BT19
Bond 1: => C = 15% . 800 =120 =>

Bond 2: => C = 40 => x= 0.3

BT20

CHAP 5
BT1
BT2
BT3
BT4
BT5
BT6
BT7
BT8
BT9
BT10
BT11
BT12