23 Jul WHAT DISCOUNT RATE GETS YOU A PRESENT VALUE CLOSE T O THE TRADING PRICE OF $106?
With interest rates so low some in Show more Please help me with this question. Thank you so much in advance! With interest rates so low some investors have con sidered replacing bond investments with stable dividend paying stocks. First well look at a bond. a. ONT 3.5 June/2/2043 is a bond issued by the Provinc e of Ontario. The 3.5% coupon is paid semi-annually on June 2 and December 2 (i.e. $ 1.75 per $100). Set up a column of dates and cash flows and manually discount them by a rate that you can adjust. (Pretend it is June 2 right now so we dont have to deal with accrued) b. What discount rate gets you a Present Value close t o the trading price of $106? (Guess and check) c. Check your answer with the XNPV function. (Put a 0 cash flow for June 2 2015 to hack the formula). d. What is the present value of the final $101.75 cash flow (that is 28 years from now)? Show less
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