Posts Tagged ‘rate’

using following Annuity formula

FV=PV*((((1+i/n)^n*y) -1)/(i/n))

how can you calculate interest rate i.

FV = Future value
PV = Present value
i = interest rate
n = number of periods in a year
y = number of years

Below is the question- I just cant seem to figure out how to show for the rates given below as solution using a BA II calculator or any other financial calculator. Does anyone know how to solve for the rates using a calculator?

Bentley Inc. has bonds on the market making semiannual payments, with 12 years to maturity, and selling for $1,200. At this price, the bonds yield 20 percent. Note: default value for face value is $1000. What must the coupon rate be on Bentley Inc.’s bonds? Round your answer to two decimal places

The correct answer was: 24.45%

As the bonds make semiannual payments:
Time to Maturity = 12yrs × 2 = 24 years
YTM = 20% / 2 = 10%

Let’s denote C as the coupon paid each period
Bond value = [Annuity present value of the coupons] + [Present value of the face amount]
1,200 = $C × (1 – 1/1.1024)/0.10 + 1000/1.1024

Solve the equation, we get C = 122.26. Therefore, coupon rates = 2 × 12.23% = 24.45%

Thanks

Please help me with this! Thanks!

depositing $1000 every month in a bank and i want i million after 7 year compunded month,interest rate needed?

I understand that the monthly dollar amount of the distribution from an annuity would be less today than say a year ago because of the low current interest rate environment that exists.

What is the PV of an annuity due with 5 payments of $1,000 at an interest rate of 5%?
1)$1,736.50
2)$4,329.48
3)$432.94
4)$5,025.00
5)$4.750.00

A couple of weeks ago I ask this question
http://answers.yahoo.com/question/index?qid=20060905135601AARhX7H Received many answers and I made an excellent choice.

I must thank http://www.jdsannuities.com and Joe for all his hard work and advice on my annuities selection and purchase. We used his service and made the purchase through him. He handled it all and we thank God that we found him and bless him for a fantastic experience. This is what we did on annuities rest in index stocks. $479,905 got us $5,000 a month for 10 years $913,030 got us $5,000 a month for as long as we both live.Of the $10,000 a month $6,560 is tax free. $500,000 at 5.10% for 5 years will be $641,185 / $500,000 at 5.25% for 10 years will be $834,000. All interest is not taxed unless we take it out. These rates are guaranteed not to change.Next is where our interest we earn depends on a stock market index. $750,000 in a 7 year index annuity/ $750,000 14 year index annuity 10% bonus $75k in account on 1st day.
That is only on the the one that pay’s $5,000 per month for as long as we both live. All the others will grow back to replace it.

Money markets are markets for
Foreign currencies.
Consumer automobile loans.
Corporate stocks.
Long-term bonds.
Short-term debt securities such a Treasury bills.

2. Which of the following statements is CORRECT?

The most important difference between spot markets versus futures markets is the maturity of the instruments that are traded. Spot market transactions involve securities that have maturities of less than one year whereas futures markets transactions involve securities with maturities greater than one year.

Capital market transactions involve only preferred stock or common stock.

If General Electric were to issue new stock this year, it would be considered a secondary market transaction since the company already has stock outstanding.

Both Nasdaq dealers and “specialists” on the NYSE hold inventories of stocks.

Money market transactions do not involve securities denominated in currencies other than the U.S. dollar.

3. If the stock market is semistrong-form efficient, which of the following statements would be CORRECT?

The required returns on all stocks are the same, and the required returns on stocks are higher than the required returns on bonds.

The required returns on stocks equal the required returns on bonds.

A trading strategy in which you buy stocks that have recently fallen in price is likely to provide you with a return that exceeds the return on the overall stock market.

If you have insider information about a particular stock, you cannot expect to earn an above average return on this information because it is already incorporated into the current stock price.

Even if a market is semistrong-form efficient, an investor could still earn a better return than the market return if he or she had inside information.

4.
Suppose 1-year T-bills currently yield 5.00% and the future inflation rate is expected to be constant at 3.10% per year. What is the real risk-free rate of return, r*? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.

1.90%

2.00%

2.10%

2.20%

2.30%

5.
Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, and a maturity premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the years to maturity. What rate of return would you expect on a 5-year Treasury security, assuming the pure expectations theory is NOT valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.

5.95%

6.05%

6.15%

6.25%

6.35%

6.
Which of the following would be most likely to lead to a higher level of interest rates in the economy?

Households start saving a larger percentage of their income.

Corporations step up their expansion plans and thus increase their demand for capital.

The level of inflation begins to decline.

The economy moves from a boom to a recession.

The Federal Reserve decides to try to stimulate the economy.

7.
Assume that interest rates on 20-year Treasury and corporate bonds are as follows:

T-bond = 7.72% A = 9.64%

AAA = 8.72% BBB = 10.18%

The differences in rates among these issues were caused primarily by

Tax effects.

Default risk differences.

Maturity risk differences.

Inflation differences.

Real risk-free rate differences

In the future value of an annuity formula:

pv*[(1+r)^n - 1]/r = fv

how do I solve for r? Thanks.

I own annuities,CDs, & regular IRAs . I am 73 yrs old and pay the minimum distribution on the IRAs.
The tax relief tax law expires Dec.31,2008 and I expect the rate to jump back to the old rate which I think will be 25% more in 2009.

What is the future value of a 5-year ordinary annuity that promises to pay you $300 each year? The rate of interest is 7 percent.

Say an interest rate of 5.5% and 7.5%.