Kaplan Investment planning

TGUN · 15-10-2009, 07:16 PM

HEyyy

Has anyone does the investment planning assignment for Kaplan?

Im stuck on Question 3 and 5.

pleaseeeeeeeeee help!

T.

CJ. Wentworth · 16-10-2009, 09:04 PM

err, I am currently working on my IP assignment, so I don't have any feedback yet however I am always happy to chat on MSN

cj.wentworth@live.com

Jimm · 02-11-2009, 05:49 AM

Have finished it and happy to help

wallstreet · 23-11-2009, 12:55 AM

Hii Jimm,
Can you please help me in question3. Which formula should I use regarding RBA bond? Very confusing.
Thanks.

Jimm · 23-11-2009, 05:47 AM

Hi Wallstreet, It looks like you have got this question going over two threads. It may be a good idea to clean up and bring them together. The equation you used on the other thread is the right one:
Price=FV+C/1+[I*(DM/D)]
After that explain how money can be lost if the bond is traded on the secondary market prior to maturity. I made this clear by including an excel table that showed how different interest rates affect the price of the bond

wallstreet · 23-11-2009, 04:52 PM

Thanks Jimm for your valuable suggesstions. I was really confused. Now feeling better. Hopefully I can finish it now.
Thanks again for your time.

jessieclare · 02-12-2009, 04:30 PM

Hi Jimm

I'm still stuck. For question 3 I wrote the following but apparently it's wrong and I dont know why. Can you help?

In order to calculate the purchase price of the 10-Year Government Bond I have assumed it has a face value of $50,000.

$100+(8.95/2)
PV = 1+[0.075x(250/365)]

PV = $99.37 x 500

PV = $49,685

CJ. Wentworth · 05-12-2009, 10:42 PM

Why have you assumed a face value of $50,000? Why not just use the value you have in your calculation ($100)

In either case though, if you redo the calculation with a higher/lower interest rate, how does it affect the market value?

Sophi · 13-01-2010, 10:29 PM

Quote:

Originally Posted by Jimm

Hi Wallstreet, It looks like you have got this question going over two threads. It may be a good idea to clean up and bring them together. The equation you used on the other thread is the right one:
Price=FV+C/1+[I*(DM/D)]
After that explain how money can be lost if the bond is traded on the secondary market prior to maturity. I made this clear by including an excel table that showed how different interest rates affect the price of the bond

Hi Jimm,
I am new too this site and just dived into my IP1 assignment...
I might be missing something but if how much is the FV, is it the $100 parcel price? :S and somehow bring that together as it is in the Example in the text book?
Thanks a million

Lourdes · 21-01-2010, 06:22 PM

Hi everyone

I was in the same boat here, was doing Q3 on my IP1 assignment. I managed to do the calculation as described by Jimm, but I don't really understand the result. I put together a table with different market interest rates, but it shows different result with the text book.

According to Kaplan study notes, when market interest rate is lower than the Coupon rate, the purchase price will be lower than the future value, vice versa. My calculations show the opposite.

ie. if i assume interest rate is at 5%, coupon rate is 8.95%, purchase price = $101.016 and future value = $100

I'm a bit confused on the future value, does this stay $100 for my comparison or do I add the coupon payment to it?
Do I understand this wrong? Please helpppp. Thanks

Lourdes