Business, 05.11.2020 18:50 mia3128

Gugenheim, Inc., has a bond outstanding with a coupon rate of 5.9 percent and annual payments. The yield to maturity is 7.1 percent and the bond matures in 15 years. What is the market price if the bond has a par value of $2,000? a. $1,785.53
b. $1,782.78
c. $1,787.88
d. $1,780.67
e. $1,818.44

Answers: 2

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Answers

Answer from: kkingstone1231

Bond Price = $1782.784041 rounded off to $1782.78

Option b is the correct answer

Explanation:

To calculate the price of the bond today, we will use the formula for the price of the bond. We assume that the interest rate provided is stated in annual terms. As the bond is an annual bond, the coupon payment, number of periods and annual YTM will be,

Coupon Payment (C) = 2000 * 0.059 = $118

Total periods (n) = 15

r or YTM = 0.071

The formula to calculate the price of the bonds today is attached.

Bond Price = 118 * [( 1 - (1+0.071)^-15) / 0.071] + 2000 / (1+0.071)^15

Bond Price = $1782.784041 rounded off to $1782.78

Gugenheim, Inc., has a bond outstanding with a coupon rate of 5.9 percent and annual payments. The y

Answer from: Quest

Ithink that’s the oneplus7pro

Answer from: Quest

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans.

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.

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