BU111 Lecture 14: BU 111 - Lecture 14 - Economic Factors Continued
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Bu111 - lecture 14 - economic factors (continued) Interest and payment periods same but more than once per year. N = years x p number of payments per year. Divide r by p number of payments per year. What is the present value of four years of payments received every six months and compounded semi-annually at 3%? r = . 03/2 = . 015. Pmt = n = 4x2 = . Rnom = rate given m = number of compounding periods per year p = number of payments per year match. Rnom = . 05 m = 2 p = 12. Rnom = . 05 m = 2 p = 4. You receive a series of coupon payments (these are interest payments for lending your money!) You receive a principal payment (one lump sum) upon maturity, i. e. you get back what you loaned to the borrower! Gm = corporation that issued the bond. 9. 5 = coupon/interest rate on the bond.
