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Present value, multiple payments, annual discounting:

I want to have $1,000,000 at the end of 1 year, $1,000,000 at the end of 2 years, and $1,000,000 at the end of 3 years. If the interest rate is 5.2%, I need to invest $  now to achieve these payouts.

(Note: Isn't this like having three accounts each with a 5.2% interest rate. How much do I need to put into the first account now so that it will have a $1,000,000 balance at the end of 1 year? How much do I need to put into the second account now so that it will have a $1,000,000 balance at the end of two years? Likewise, how much to I need to put into the third account now so that it will have a $1,000,000 balance at the end of 3 years? Can't we just add these initial sums together and put everything in one account with a 5.2% interest rate? That's the amount you need to invest now in order to have each of these time-specific balances.)

Given 2-yr treas bond yield, find price:

Suppose a $100,000 T bond has two years to maturity, a 5.52 % annual coupon rate, semiannual coupons, and a yield of 5.62%. Its price is $. 

This price is quoted in points and 32nds as-.

Given 3 yr treas bond yield, find price:

Suppose a $100,000 T bond has three years to maturity, a 5.32 % annual coupon rate, semiannual coupons, and a yield of 5.12%. Its price is $.

This price is quoted in points and 32nds as -.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91557930

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