This website uses cookies to ensure you have the best experience. Learn more

Bonds Essay

1716 words - 7 pages

For example, say you want to determine how many years it will take for you to accumulate $1,000,000 by saving $500 per month at 10% E. growth per annum.

P/Y = 12 I/Y= 10 PMT= -500 FV = 1000000 Solve N= 345.0922 MONTHS DIVIDE BY 12 =28.758 YEARS
If you stand to inherit $100,000 in 10 years, what is it worth now at a 10% discount rate? P/Y = 1 N = 10 I/Y= 10 FV=100000 Solve PV = 35174.82

1. You want to lease a new Taurus. The sticker is $20,000. Tax and title is $1250. The lease term is 3 years. The loan APR interest rate is 6%. The depreciation is 18% in year 1, 12% in year 2 and 10% in year 3. The cap cost reduction (increase in cost) is $500. CALCULATE LEASE PAYMENT
...view middle of the document...

SOLVE FOR PMT. PV = -16300 FV = 13735 N = 36 SOLVE FOR PMT = $170.81

6. You need retirement income of $2500 per month. You plan to retire at age 55. Your actuarial life expectancy is 85. HOW MUCH MONEY WILL YOU NEED AT AGE 55 TO FUND THIS RETIREMENT ANNUITY ASSUMING AN 8% INVESTMENT RETURN DURING RETIREMENT. SET END. P/Y = 12 I/Y = 8 PMT = $2500 N = 30 X 12 = 360 FV = 0 SOLVE FOR PV = -$344,236

7. How much will you need to save EACH MONTH in problem 6 above assuming an investment return BEFORE RETIREMENT from age 25 to age 55 (30 YEARS) ASSUMING A 10% INVESTMENT RETURN PRIOR TO RETIREMENT. SET END. P/Y = 12 N = 360 I/Y = 10 FV = $344,236 (do not enter this as negative) SOLVE FOR PMT = -$151.03
8. You have a child age 4. You need to save for college. The cost of college in a public university if $9000 per year in current dollars. Your estimated investment return is 8%. College costs are rising at 6%. CALCULATE.THE TOTAL COST OF A COLLEGE EDUCATION IN A PUBLIC UNIVERSITY FOR THIS CHILD BEGINNING AT AGE 18 FOR 4 YEARS. STEP ONE: Calculate annual cost in YEAR 14 AT 6% inflation. SET BGN:N=14 P/Y = 1 I/Y = 6 PV = -9000 SOLVE FOR FV. This is college cost in year 14. FV =20348.13 STEP TWO: Calculate annual cost of college (year 14-17) FRESHMAN YR 14 $20348.13 SOPHOMORE YR 15 $21569.02 (YR 1 x 1.06)
JUNIOR YR 16 $22863.17 (YR 2 x 1.06) SENIOR YR 17 $24234.96 (YR 3 x 1.06 TOTAL COST – 4 YEARS $89015.28
STEP THREE: Calculate how much you need to save each month to accumulate enough funds to meet total dollar need in step two. Use I/Y of 8%. P/Y = 12 N = 168 I/Y = 8 PV = 0 FV =$ 89015.28 SOLVE FOR PMT PMT = -$ 287.07 SAVINGS / MONTH --1 CHILD Save for 14 years (168 months) at assumed return of 8%
9. You want to buy a home costing $200,000. You plan to put 20% down. The loan cost includes 2 POINTS which ar added to principal at closing. The rate is 7.25% for a 30 year mortgage and 6.85% for a 15 year mortgage. CALCULATE PAYMENT FOR A 30 AND 15 YEAR LOAN.
HOME PRICE=$200,000 [COST = PRICE (1- DN PMT) + POINTS AND CLOSING COSTS] = MORTGAGE LOAN = $160,000 (this is an outflow)
DOWN PAYMENT = 20% POINTS = 2 = 2% 0F LOAN P/Y = 12 ( 1 Point is 1% of LOAN) 2 points = $3200.
PV = INITIAL MORTGAGE BALANCE: -$163,200 30 YEAR MORTGAGE N = 360 I/Y = 7.25%
15 YEAR MORTGAGE N = 180 I/Y = 6.85% SET BGN solve for PMT: 30 year $1106.62 15 year $1444.99 ($338.37 / mo more)
31% higher payment paid off 50% faster A simple strategy is to pay an additional $338 per month (applied to principal) when you can to amortize the loan.

10. YUPPIE MORTGAGE. Use the facts of the problem 9 above for a 30 year mortgage. Assume payments are made every 2 weeks (26 times per year – 52/2 = 26). Solve for N and divide by 26 to determine the years to pay off this “30 year” mortgage. PMT = 1106.62/2 OR $553.31 BI-WEEKLY
Set P/Y to 26 (52/2) Most people will not notice the difference...

Other Papers Like Bonds

Individual Essay

724 words - 3 pages statements about bonds. 1 True, 2 True, 3 True, 4 True 5 False, the Secured Bonds that have specific assets of the issuer pledged as collateral. 6. False Bonds that mature in installments are called term bonds. 7. True 8. True, 9. True, 10. True E10-18 Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2011, for $562,613.This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable semiannually

Banking And Finance Assignment Package 2 (Weight In Total Marks-20% ) Each Of The Following Question Carries 2 Marks

271 words - 2 pages Q1. What is risk premium? How is it measured? When there is an increase in the default risk on corporate bonds (due to bad economic conditions), what will happen to risk premium. Will it shrink or widen? Why? (See pages 120-22 3rd edition) (see page 114-115 4th edition) Default risk occurs when the issuer of a bond is unable or unwilling to make interest payments when promised or pay off the face value when bond matures. This could happen to

Cheaters And The Hall Of Fame

1295 words - 6 pages Cheaters and the Hall of Fame Geoffrey Barndt COM/170 April 7, 2014 Dr. Hancock Cheaters and the Hall of Fame Should there be a difference in punishment between the use of performance enhancing drugs and gambling in the sport of baseball. In baseballs long and great history there has been two scandals that have given baseball a black eye. One being the story of Pete Rose, and the other being the story of Barry Bonds.” After a Hall

Ac202

694 words - 3 pages Exercise 14-2 1. Discount = Par value - Issue price = $90,000 - $85,431 = $4,569 2. Total bond interest expense over the life of the bonds |Amount repaid | | | Six payments of $3,600 |$ 21,600 | | Par value at maturity | 90,000

Prospects And Challenge Of Nepalese Debt Market

2827 words - 12 pages * Prospects and Challenges of Nepalese Debt market 1. Introduction Debt market may be short-term, intermediate and long-term. Short-term and intermediate-term financing sources include trade credit, bank loan, finance company loan, commercial paper; inventory financing includes the issuance of mortgages and bonds (Shim J.K; 1989:138). The importance of the debt market in an emerging economy cannot be overemphasized. In the presence of

Nm, Njknb

501 words - 3 pages . d) You expect gold to appreciate in value. e) Prices in the bond market become more volatile. 2. Explain why you would be more or less willing to buy long-term AT&T bonds under the following circumstances: a) Trading in these bonds increases, making them easier to sell. b) You expect a bear market in stocks (stock prices are expected to decline). c) Brokerage commissions on stocks falls. d) You expect interest rates to rise. e) Brokerage

Ef3333 Assignment1

377 words - 2 pages the bond market become volatile,. Since the price volatility in bond market will increase the risks of investing bonds, the demand for bonds will fall and the demand curve will shift to left. As a result, the price of the bonds will drop and the interest rate will rise. 7. Interest rate will increase if a government has a large deficit. Since the government has to issue more bonds to cover its deficit, the supply for bonds will increase that will cause supply curve shifts to right. As a result, the price will drop and the interest rate will rise. 8. Expected yield of the bond=3%+4%+5%+5.5%/4=4.375% Liquidity premium=4.5%-4.375%=0.125%

Restructuring Debt

701 words - 3 pages the debt. Companies disclose the features of the indenture within the body of its financial statements so that end users can have a precise understanding of the company’s financial positioning and its operations results. Bonds and Notes Payable According to Kiesco, the main purpose of bonds is to borrow for the long term when the amount of capital needed is too large for one lender to supply (2007, p. 673). Bonds allow more than one

Mpbl 510 Week 5

436 words - 2 pages $932.21. We wish to compute the yield to maturity…” [pic] [pic] The corporation had issued bonds at $110, and the current price of the bond is $932.21. At this current price, the ongoing yield to maturity increased to 12 percent (11.94 percent, using the approximation method). Conclusion Yield to maturity is pretty easy concept to understand after looking at different examples and how the formula works. Yield to maturity

Intermediate Acctg 2

269 words - 2 pages Intermediate Accounting 2 Week 1 homework 12-5 Research & Development Costs 940,000 Legal Costs 75,000 Prepaid Rent 26,000 Rent Expense 65,000 Discount on Bonds Payable 82,950 Interest Expense 1.050 Advertising Expense 207,000 Income Summary 141,000 Paid in Capital in Excess of par on Common Stock 250,000 Intangible Assets 1,288,000 12-15 (a.) 335,000,000 Fair Value -160,000,000 net

Eurobonds

1743 words - 7 pages The bond market is a less known in the financial world than the share market, but it doesn’t mean that it is not as important as the share one in terms of volumes. The main reason may be that the Governments are a big part of this market. Because unlike a share, a bond is a debt contract not a proportion of capital. Usually, the international bond market is divided in three entities: the domestic bonds, the foreign bonds and the Eurobonds. The

Related Essays

Finance Bonds Essay

1242 words - 5 pages concerned about the taxes paid by the company in 2008. In addition to $250,000 of taxable income, the firm received $1,000 of interest on state-issued bonds and $6,000 of dividends on common stock it owns in Sprinklers, Inc. Using the tax schedule from Table 2-3, what is Scuba's tax liability, average tax rate, and marginal tax rate, respectively? (1.5 points) 2. DuPont Analysis and sustainable growth rate You have located the following

Dim Sum Bonds Essay

4815 words - 20 pages JANUARY 19, 2011 GLOBAL CORPORATE FINANCE SPECIAL COMMENT The Current Menu for Renminbi Bonds in Hong Kong: Dim Sum or Synthetic? Overview 1 2 5 Table of Contents: OVERVIEW MARKET PERSPECTIVE SURGE IN RENMINBI DEPOSITS AND TRADE SETTLEMENTS IN HONG KONG GROWTH IN RENMINBI TRADE SETTLEMENTS SUBJECT TO REGULATORY MEASURES SURGE IN DIM-SUM BOND ISSUANCE DIVERSIFICATION OF ISSUERS THE “DIM-SUM SUBSTITUTE”: SYNTHETIC RENMINBI BONDS 6

What Fundamentals Affect The Yield Of Bonds In The Singapore Market

3435 words - 14 pages What  fundamentals  affect  the  yield  of  bonds   (Singapore  market)                     By:     G8   Lee  Kang  Wee   Olivia  Tan   Daryle-­‐alexis  Tan   Ho  Guoming               FIIM  FNCE  102   Professor  Huang  Sheng

Eurobond Essay

901 words - 4 pages Euro bonds and International bonds Debt investments that are issued in a country by a non-domestic entity. International bonds are issued in countries outside the United States, in their native country's currency. They pay interest at specific intervals, and pay the principal amount back to the bond's buyer at maturity. International bonds include eurobonds, foreign bonds and global bonds. A different type of international bond is the Brady