Question

If it is invested in Cetes with a rate of return of 7% and they will be amortized in 85 days with a face value of $10,000. Calculate the price and discount rate.

          If it is invested in Cetes with a rate of return of 7% and they will be amortized in 85 days with a face value of $10,000. Calculate the price and discount rate.
        

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Horngren’s Cost Accounting
Horngren’s Cost Accounting
Srikant M. Datar, Madhav V. Rajan 16th Edition
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If it is invested in Cetes with a rate of return of 7% and they will be amortized in 85 days with a face value of $10,000. Calculate the price and discount rate.
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Transcript

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00:01 In the question, the face value of the bond is given to us is of $1 ,000.
00:10 And the coupon rate is of 10 % and it is being paid semi -annually.
00:24 Now, ill to maturity, or we can say that ytm, is given to be 8 .5 % and and the bond matures in eight years now we need to find out the price of the bond so for that first of all we will be finding the coupon payment per period so the coupon payment per period is how much the face value of the bond is of 1 ,000 and the coupon rate is of 10 % and it is being paid semi -annually so 1 by 2 so this comes to $50.
01:18 So the bond pays $50 per period that means in each six months.
01:23 So this is our coupon payment per period.
01:25 Now the effective ytm or we can say the value of r is going to be 8 .5 % annually so divided by two the payments are in semi -annual...
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