You are considering investing in a security that matures in 10 years with a par value of $1,000. During the first five years, the security has an 8 percent coupon with quarterly payments (i. e., you receive $20 a quarter for the first 20 quarters). During the remaining five years the security has a 10 percent coupon with quarterly payments (i. e., you receive $25 a quarter for the second 20 quarters). After 10 years (40 quarters) you receive the par value. Another 10-year bond has an 8 percent semiannual coupon (i. e., the coupon payment is $40 every six months). This bond is selling at its par value, $1,000. This bond has the same risk as the security you are thinking of purchasing. Given this information, what should be the price of the security you are considering purchasing

$1,060.75

Explanation:

the yield to maturity of the second bond is to 4% semiannual or 8.16% effective annual rate.

so we have to calculate the quarterly interest rate that yields an effective annual rate of 8.16%:

0.0816 = (1 + i)⁴ - 1

1.0816 = (1 + i)⁴

⁴√1.0816 = ⁴√(1 + i)⁴

1.0198 = 1 + i

i = 0.019804 = 1.9804%

now we must discount the first bond using that effective interest rate:

PV of face value = $1,000 / (1 + 4%)²⁰ = $456.39

PV of first 20 coupon payments = $20 x 16.38304 (PV annuity factor, 1.9804%, 20 periods) = $327.66

now we must find the value of the last 20 coupon payments but at the end of year 5 = $25 x 16.38304 = $409.58. Then we calculate the PV = $409.58 / (1 + 4%)¹⁰ = $276.70

the bond's current market value = $456.39 + $327.66 + $276.70 = $1,060.75

the correct answer would be b, when, queen, calder hall and london.

explanation:

we always capitalize words when a paragraph or sentence is starting, when an important name is used, when a place is being written, or simply when a noun is used, etc. so in this sentence, sentence is starting from 'when', so it will be written in capital letters. secondly, queen is considered to be an important person, so it will also be written in capital letter. next, the name of the town is mentioned, i-e calder hall, which will also be written in capital letters. in the last,   city name is being used, 'london', which will also be written in capital letters. so option b is the most appropriate one.