Math 400 - Theory of Interest
Homework #18
NAME:__________________________________
1. A five-year bond has face value $1000 with coupons at 12% convertible
semi-annually.
a. Suppose the redemption value is $950, and the bond is bought to yield 9%
convertible semi-annually. Find the purchase price by using
the basic formula,
the premium/discount formula,
the base amount formula,
the Makeham formula.
b. Suppose the redemption value is $950, and the bond is bought to yield 9%
convertible semi-annually. Find either the amount of premium or the amount of discount,
whichever is appropriate.
c. Suppose the redemption value is C, and the bond is bought to yield 9% convertible
semi-annually. Find the value of C for which the bond is not sold at either a premium or
a discount.
d. Suppose the redemption value is C, and the bond is bought to yield 9% convertible
semi-annually. Find the value of C for which the price is equal to the face value.
e. Suppose the redemption value is $950, and the bond is bought to yield 15%
convertible semi-annually. Find the purchase price by using
the basic formula,
the premium/discount formula,
the base amount formula,
the Makeham formula.
f. Suppose the redemption value is $950, and the bond is bought to yield 15%
convertible semi-annually. Find either the amount of premium or the amount of discount,
whichever is appropriate.
g. Suppose the redemption value is C, and the bond is bought to yield 15% convertible
semi-annually. Find the value of C for which the bond is not sold at either a premium or
a discount.
h. Suppose the redemption value is C, and the bond is bought to yield 15% convertible
semi-annually. Find the value of C for which the price is equal to the face value.
i. Suppose the redemption value is $950. If the price is $900, use the Excel Solver or
the Finance option on the TI calculator to find the yield rate convertible semi-annually.
MORE 
j. Suppose the redemption value is $950. If the price is $1100, use the Excel Solver or
the Finance option on the TI calculator to find the yield rate convertible semi-annually.
2. Construct a bond amortization table for a $1000 two-year bond with 7% coupons paid
semi-annually bought to yield 8% semi-annually.
3. Construct a bond amortization table for a $1000 two-year bond with 7% coupons paid
semi-annually bought to yield 6% semi-annually.