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56 41. 42. 43. 44. 50m Chapter 9 1. 1.00 2. .82 3. 12.9% 4. 116.8% 5. ) $25,633 6. ) Option 7. 8.07% 8. $767.55 9. fl) 720 10. 13.89% . .00685 12. b) ) 1- - 13. ) 1,161,400 14. ) $141,500 15. 7.91% 16. ) $946.93 17. ) $857.33 18. 6.4646 19. ) 9.64% 20. 26.45% 21. Minimum = $128,614 Maximum = $129,470 b) $23,736 ) $16,658 b) Option b) 240 <f) 1 - -"" b) 16,600 ) 1.11% b) $128,300 b) $1036.53 b) $1000.00 b) 10.51% c) 7.975% rf) 7.953% /) Yes (v + 2 2) 24. 25. a(0 = 28. a) $3616 30. $1591 32. 33. a) (1) -1.8012 b) (1) 1.8854 34. a) 0 Z>) 94.307 35. 1250 b) 2.2035 c) 1.7628 d) .6046 *(0 = V (V + V) (2) 0 (3) 1.8343 (2) 0 (3) -1.7531 c) 312.5 i(n + l)(n + 2) 36. 38. $13,223 in 1-year zero coupon bonds $15,061 in 3-year zero coupon bonds $9624 in 5-year zero coupons bonds 39. $9091 in 1-year zero coupon bonds $8265 in 2-year zero coupon bonds $7513 in 3-year zero coupon bonds $6830 in 4-year zero coupon bonds $6209 in 5-year zero coupon bonds 40. a) $179.37 b) 12.01% 41. a) 0 < P] < .6980 b) No solution exists 42. a) .2186 < Pi< .5931 b) No solution exists Chapter 10 3. a) 8% in all years b) 0 in year 1; .01 in year 2; .Olyin year 3 c) $1294.92 rf)$1224.94 e) $1259,71 f) $1259.82 g) 26.08 4. a) .07997 b) .79390 c) .16630 d) .( 735 5. mean = 2.5772 s.d. = .0169 6. a) mean = 1.823 b) mean = 14.121 c) = .549 d) mean = 7.298 s.d. = .058 s.d. = .297 s.d. = .017 s.d. = .134 40. $4.6! $365.63 $116,500 31.33% 7 + 4
| | | | Svmbol | Section | Description | Symbol | Section | Description | | | | | | | | | | accumulated value of a decreasing annuity | | | retrospective loan balance | | 10.4 | a measure of equity required to support liabiUties | {+ | | flat price of a bond | e{t) | 10.3 | error term in AR(1) and AR(2) processes | „m ,+ | | market price of a bond | | 10.5 | exercise (striking) price of an option | | 10.5 | value of a callable bond | | 10.2 | expectation of random variable X | | | 10.5 | value of a noncallable bond | | | expected present value | | | convexity | | | project financing rate | | | redemption value of a bond | | | forward rate | | | 10.5 | value of a call | | | | | | 10.6 | value of call if stock goes down | | App. IV | probabihty density ftinction | | | | | fiinction being solved using iteration | | | contribution, deposit | | | face amount, par value of a bond | | | | contribution, deposit at time /j. | | | present value of single payment at time n | | | | redemption value of a serial bond | | | bond coupon | | 10.6 | value of call if stock goes up | | | accrued bond coupon | | | summation of redemption values of serial bonds | Fix) | App. IV | cumulative distribution fiinction | cov[X, Y] | 10.3 | covariance of random variables X and | | | modified coupon rate on a bond | | | effective rate of discount | gix) | | iteration formula | | | | rate of simple discount | | | | | | rate of compound discount | «1. 82 | 10.3 | roots of die characteristic equation for die AR(2) process | | | | factor in the declining balance method of depreciation | | | base amount of a bond | | | App. Ill | common difference in an arithmetic progression | | | | | | factor in a variation of die declining balance mediod of | | | present value of level perpetuity starting at time n | | | | | | | depreciation | | 10.6 | length of time interval in binomial lattice | | | duration, Macaulay duration | | | periodic charge of an asset | | | | effective rate of discount from time n - 1 to | | | present value of increasing perpetuity starting at time | | | | nominal rate of discount convertible mthly | | | effective rate of interest | | | | | | | rate of simple interest | | | 10.5 | constants in the Black-Scholes formula | | | rate of compound interest | | | sinking ftind deposit | | | yiekl rate, internal rate of relim | | | 7.10 | dividend on stock | | | investment rate when j is the reinvestment rate | D> | | depreciation charge | | | interest rate on loan in sinkinj fiind method | | | | annual percentage rate (APR) | Di,D2 | | day of date | | | nominal rate of interest | | | | present value of a decreasing annuity | | | |
436 The Symbol E, m, «2 Pv Pi 10.2 10.2 10.2 2.3 various 10.5 7.4 9.5 10.6 9.10 cumulative distribution fiinction for the standard normal distribution premium or discount on a $1 bond probabiUty bond does not default probability of price increases in binomial lattice probability bond does not default at time / proportion of fiinds in different investments in asset/liability matching price of a bond price of a put price of a serial bond summation of prices of serial bonds amount of principal repaid on loan amount of principal adjustment on bond instantaneous rate at which principal is being repaid net present value net present value based on spot rates probability bond defaults expenses at setdement on real estate mortgage that must be reflected in APR Symbol Section Description ..(m) Sjt\ j„(mi) S 5.9 project return rate 7.3 coupon rate on a bond 9.4 rate of inflation 10.4 yield rate in CAPM App. ni common ratio in a geometric progression 10.4 return on equity 10.4 risk-free rate of interest 10.4 yield rate on a specific security 10.4 appropriate rate to discount liabilities 10.4 yield rate on die market portfolio 4.3 equivalent payment per interest conversion period 6.3 level installment payment to repay a loan 8.5 level periodic return 5.2 return, wididrawal 6.6 varying installment payments to repay a loan 9.9 net receipt in immunization App. Ill sum of a progression App. Vin sum of an annuity 1U.2 variance of rate of interest 9.10 wididrawal amounts at different times in asset/liability matching accumulated value of an n-period 3.2 annuity-immediate 3.3 annuity-due 4.4 annuity-immediate payable mdily 4.4 annuity-due payable mdily 4.5 continuous annuity App. Vin expected value of die sum of an annuity 8.5 salvage value of asset after depreciation 10.5 current stock price 8.4 sum of die first r positive integers App. IX random variable for die value of an asset Section Description 9.9 cash outflow generated by UabiUties App. VIII first moment about the origin App. VIII second moment about the origin 10.2 first moment of 1 + j, about the origin second moment of 1 + J, about the origin first moment of (1 + i,)" about the origin second moment of (1 + about the origin periodic maintenance expense month of date the term of a transaction
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