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Using TVM mode:
97 +/- PV, 100 FV, 2.5 PMT, 12N, CPT I/Y.
You will get 2.79%.
so that means you earn 2.79% in 6 months.
You have 2 quarters in 6 months.
So now, put 100+/- PV, 0 PMT, 102.79 FV, 2N, CPT I/Y. You get 1.389%.
Now 1.389*4= 5.557%. so your stated annual rate based quarterly is option C
can you please explain it to me,what exactly is the question asking and what is the ear and sar in this question,and the relevence of bond issue price and fair price,i cannot understand the language of the question
First we will compute interest
100=FV -97=PV 2.5=PMT 6*2=N
CPT I/Y 2.79776
Now
PV=100 FV=102,7966 N=2
CPT I/Y 1.389
We will convert it for quarters
1.389*4=5.557%
Can you help you how to calculate PMT?
Coupon rate is given as 5% p.a and it is given semi annually so 2.5% for 6 months. We will calculate the coupon value on face value ofbond so 100*2.5%=2.5. So PMT is 2.5
Thank you.