Julie Orzabal deposits $5,000 in a savings account

Julie Orzabal deposits $5,000 in a savings account

Subject: Business    / Finance   
Question
1.    Julie Orzabal deposits $5,000 in a savings account offering 5.125 percent compounded daily. Assuming she makes no further deposits, what will be the balance in her account after 5 years?
2.    Write the equation expressing the present value (or price) of a bond that has a 10 percent coupon (annual payments), a 5-year maturity, and a principal of $1,000 if yields on similar securities are 8 percent. Compute the price using a calculator.
3.    Find the price of a corporate bond maturing in 5 years that has a 5 percent coupon (annual payments), a $1,000 face value, and an AA rating. A local newspaper's financial section reports that the yields on 5-year bonds are AAA, 6 percent; AA, 7 percent; and A, 8 percent.
4.    What is the yield-to-maturity of a corporate bond with a 3-year maturity, 5 percent coupon (semiannual payments), and $1,000 face value if the bond sold for $978.30?
5.    Explain why yields and prices of fixed-income securities are inversely related.
6.    What is the relationship between bond price volatility and term-to-maturity? Between bond price volatility and the coupon rate?
7.    Carol Chastain purchases a 1-year discount bond with a $1,000 face value for $862.07. What is the yield of the bond?
8.    David Hoffman purchases a $1,000 20-year bond with an 8 percent coupon rate (annual payments). Yields on comparable bonds are 10 percent. David expects that, 2 years from now, yields on comparable bonds will have declined to 9 percent. Find his expected yield, assuming the bond is sold in 2 years.
9.    Calculate the duration of a $1,000, 4-year bond with an 8 percent coupon rate (annual payments) that is currently selling at par.
10.    Calculate the duration of a $1,000, 12-year zero coupon bond using annual compounding and a current market rate of 9 percent.