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i Chrome File Edit View History Bookmarks People Window Help 63% Fri 5:55 PM a Exam 2 Chapter 5-8 ezto.mheducation.com/hm.tpx Apps cu Principles of Finance: Section HYB01- Fall 17 Angely Amaya FINANCE Exam 2 Chapter 5-8 instructions I help Question 19 (of 26) Save &Exit; Submit 19 Compute the price of a 5.7 percent coupon bond with fifteen years left to maturity and a market interest rate of 8.0 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Bond price Is this a discount or premium bond? Discount bond O Premium bond

Explanation / Answer

N = 15 years

Coupon Rate = 5.7%

Coupon Payment = 1,000

Market Rate = 8%

FV = 1,000

Using Financial Calculator:

PV = 803.13

As PV is less than FV, it is a discount bond

Part 2:

Down Payment = 1,200

Monthly Payment = 430

N = 12 * 4 = 48

Monthly Interest Rate = 7.5%/ 12 = 0.625%

We will calculate Present value of these monthly payment.

Adding Present value and down payment, we will get the cost of car then he can afford.

By using financial calculator:

PV = 17,784.10

He can afford a car of = 17,784.10 + 1,200

He can afford a car of = 18,984.10

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