Calculations

Question 1

Thierry purchased a bond with a face amount of $1,000 on November 1 at a price of $105.75. The
bond pays a semi-annual interest amount of $30 on April 30 and October 31 and has eight years
remaining to maturity. What will Thierry’s annual rate of return be if he holds it to maturity?

Answer 1

5.12%

The purchase price was $1,057.50 based on a price of $105.75. Using key strokes,
Mode=end, PV=1,057.50, FV=1,000, PMT=30, N=16 (2 times 8), solve for I=2.56 times 2=5.12%

Question 2

Ordinary annuity? Annuity Due?

Answer 2

Ordinary: 1st cash flow at time 1 (end)

Annuity due: cash flow at Time 0 (start)