Project #47721 - Time Value and Bonds

Question 1 - Time Value interest Rate Problem

You are considering an opportunity to purchase a long term CD from Titan Bank to provide partial funds for your child’s college education. The CD has a Face Value of $50,000, payable in 15 years.  The purchase price today is $33,500.

You have an alternative long term for 15 years Bank CD available that is paying 4.0% interest.  

A-What interest rate is Titan Bank offering?   (Show all Calculations)

B- Should you purchase the Titan CD?

C- Why or Why not?

 

 

Question 2 - Time Value Annuity

 

You are considering setting up and funding a retirement annuity that will allow you to retire in 20 years. You plan to deposit into the fund annual payments of $12,000 at the beginning of each year. The retirement annuity fund is to pay annual interest at a rate of 8%.

 

How much money will be in the in the retirement fund immediately following the last deposit? (Show your work)

 

Question 3 - Bond price

Acme Company is issuing a $1,000 par value bond with semiannual coupon payments. This bond has a coupon rate of 7%, a yield to maturity of 8%, and a maturity of 20 years.

What price can Acme Company expect to receive for this bond? (Show your work)

Subject Business
Due By (Pacific Time) 11/16/2014 07:00 pm
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