Quantitative Finance
# Bond Pricing

Find the single percentage discount which is equivalent to a discount of 20% followed by a 30% discount.

If your answer is 10%, enter 10.

Approximately how much do you have to place in a bank which pays 1% interest per annum (compounded annually), so that you will have $100 in it in 10 years?

You own a bond that will pay 10% per year for the next 10 years, on a principal of $1000. The prevailing discount rate is 10% throughout.

What is the bond worth now?

The **discount rate** is the interest rate that is used in discounted cash flow analysis.

A 5 year, 5% coupon $1000 corporate bond yielding 5% is currently trading for $995. What trade would you want to execute?

Note: Ignore transaction costs and interest rates.

$g$, using a discount rate of $r$. If the dividend in the first period is $D$, what is the value of this cash flow?

You want to value stock dividends that are projected to grow forever at a constant rateAssume that $r > g$.