Kaplan Investment planning

hi Lourdes,

why are you assuming the market interset rate is 5%? it says in the question that it is 7.5%. thnx - when is your assignment due?

Hi Sophi

I just made some comparison to the interest rates, it can be any amount.

Mine's due in April, I tried to finish it early but looks impossible.

I have problems reading so many words in the book.

How are you doing with yours?

Are you sure this is what it says? The opposite sounds true.

When Market Interest Rates are higher than the Coupon Rates offered, why would anyone buy them? IE their perceived value falls.

When the Coupon Rate is higher than Market Rate, their perceived value should rise, as they are offering higher returns than the market.

Hi CJ

I'm reading the study notes again, you are correct. I got confused between purchase price and market price of the coupon.

So, it makes sense now and the interest rates table also makes sense.

Thanks for your help.

I'm moving on to Q5 now, still figuring how to answer question c.

Are you doing IP1 as well?

answer question 3.
Answer: She cannot benefit from increases in market interest rates that may occur during the term of the investment as her investment rate is fixed for the term of your investment.
Interest rate market may be volatile. Investments in these markets may involve actual losses if she requests the bank to terminate her fixed interest investment prior to her maturity.
She should ensure that she is able to monitor the interest rate movement when investing in this product, the bank may be dealing on its own account in interest rate markets and such dealings may influence interest rates. Therefore if the interest rates rise then her bond price will fall.

PV = $50,000 + 4.75% x 175/365 = $50,000
PV = 3 + 0.057 = 3.057
PV = 50,000 % 3.057 = 16355.90**

hope this help..

hi tsh01,
sorry to ask but what is that $50K in your calculations? as the question says "Use a parcel price of $100".I believe the FV= $100; thanks,