Exercise 7 Instructions
1. It is important to know what the standard rates are. Look at Money Cafe. Click on “more interest rates.” Read through the definitions and report the rates for each: Prime Rate, 1-Year Treasury, and LIBOR.
2. Go to Yahoo.com, click on Yahoo Finance, and enter Coke in the “symbol(s)” search box.
· Step (a): Record the last closing price (for example, previous close – yesterday’s closing price)
· Step (b): Record the change (current price minus previous close) for the day (up or down and how many dollars & cents)
· Step (c): Divide your change for the day (from b above) by the last closing price (from step a above). The result is typically something like 0.1234 or 0.0123. Convert the decimal to a percent (such as 12.34% or 1.23%).
· Step (a): Last closing price (previous close) of Coke = 66.26
· Step (b): Change for the day (up or down) = -$.05
· Step (c): Divide (b) by (a) = -$.05/$66.26 = 0.00075 = -.08% <– R.O.I. in percent.
· Find the yield to maturity on the following bond.
3. I can buy a $1,000 bond for $950. I get $50 a year and it matures in 20 years. Find the YTM (interest rate). Remember this is a time value of money problem, so you need to use your financial calculator or Excel and include inputs.
*Put your answers to all these problems into the comment section of the assignment link.
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