dougmal

January 16th 2006, 02:07 PM

Even with textbooks in front of me i can't figure out # 2 from the fall 2005 exam. Here's the question:

Data for Question 2 (5 points)

Terms of a serial bond:

Face amount of bond: $100,000.

Terms of redemption: 10 equal annual installments at 125% of par

commencing at end of 10th year after purchase;

except that the 4th redemption is at 100% of par.

Coupons: 6%, payable semi-annually.

Yield rate: 5%, compounded annually.

Question 2

In what range is the purchase price?

(A) Less than $121,850

(B) $121,850 but less than $121,950

(C) $121,950 but less than $122,050

(D) $122,050 but less than $122,150

(E) $122,150 or more

Basically, i don't understand the terms of redemption. Any help would be greatly appreciated! thanks!

Data for Question 2 (5 points)

Terms of a serial bond:

Face amount of bond: $100,000.

Terms of redemption: 10 equal annual installments at 125% of par

commencing at end of 10th year after purchase;

except that the 4th redemption is at 100% of par.

Coupons: 6%, payable semi-annually.

Yield rate: 5%, compounded annually.

Question 2

In what range is the purchase price?

(A) Less than $121,850

(B) $121,850 but less than $121,950

(C) $121,950 but less than $122,050

(D) $122,050 but less than $122,150

(E) $122,150 or more

Basically, i don't understand the terms of redemption. Any help would be greatly appreciated! thanks!