Question No. 1:
a) Today, most of the people in our country acknowledge the importance of education in our lives.
Therefore, Mr. Akram is also planning to provide the best education to his son. In this regard, he is
planning to set aside a handsome amount for his son education. Suppose the university fee of his
son after 10 years will be Rs.200, 000. His bank is offering him 12% interest rate compounded
annually. How much amount he has to deposit in his bank account today in order to get Rs.200, 000
from his bank after 10 years? (5 marks)
b) Suppose you have some extra funds with you and you want to make investment in bonds with those
funds. Currently a 6% coupon bond with face value of Rs.1, 000 is selling at Rs.850. If you want to
keep that bond till its maturity (which is one year), then what will be the yield to maturity of this
bond? (5 marks)
Question No. 2:
a) Define GDP deflator and explain how it differs from CPI (Consumer Price Index) although both are used to measure inflation rate in an economy? (4 marks)
b) Suppose you are given the responsibility to calculate the inflation rate prevailing in an economy.
You, along with your team members, collect the following data related to that particular economy:
Years Nominal GDP Real GDP
2009 Rs. 48,300 Rs. 46,200
2010 54,400 51,000
2011 59,300 53,000
How you will measure the inflation rate based on the above data? (6 marks)
Note: You are required to provide complete working and formulas while calculating GDP deflator
and Inflation rate.
Tags:
plzz koi word file mai upload kr de
just for idea !!!!
The formula for yield to maturity is:
Price = Coupon payment + Face value
(1+YTM)^{1 } (1+YTM)^{1}
If the selling price of a bond = 120
Face value = 100
Coupon payment = 10, then we can find the YTM using this formula.
$120 = $10 + $100
(1+YTM)^{1 } (1+YTM)^{1}
1+YTM = $110/$120
1+ YTM = 0.917
YTM = 0.917-1= -0.083
YTM = -8.3%
Thanksssssss a lotttt
very_funny thanks & gud
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question mein coupon payment to di ni hy hum us mein kia likhain gy???????????????
MGT411 2nd Assignment Solution Last Date: Nov 29, 2012
Q1 a) - PV = FV/(1 + i)^n
Present Value = Future Value/ (1+(interest))^years
PV = 64394.65
You cant check the answer at ---> http://www.investopedia.com/calculator/p...z2DMQFJocV
b) -
Subtract the purchase price (850) from par value (1000) = 150
Divide the discount (150) by the remaining years to maturity (1) of the bond = 150
Add the annualized capital gain (150) to the yearly interest (60), to obtain total annualized return (210)
Subtract annualized capital gain (150) from par (1000), to obtain 850.
Divide the annualized return (210) by the result from the previous step (850), Yield to Maturity 24.70%
(Method taken from : http://www.wikihow.com/Calculate-Yield-to-Maturity)
Can check the answer : http://www.investopedia.com/calculator/a...z2DMQFJocV
Q2 a) - Although at first glance it may seem that CPI and GDP Deflator measure the same thing, there are a few key differences. The first is that GDP Deflator includes only domestic goods and not anything that is imported.
This is different because the CPI includes anything bought by consumers including foreign goods. The second difference is that the GDP Deflator is a measure of the prices of all goods and services while the CPI is a measure of only goods bought by consumers.
(Copied from: http://www.econport.org/content/handbook...x/CPI/...)
b) - GDP Deflator = (Nominal GDP / Real GDP) ×100
Inflation rate = (Current Year’s GDP Deflator – Previous Year’s GDP Deflator) / Previous Year’s GDP Deflator X 100
Inflation Rate
n.a
2.1%
4.9%
Question No. 1:
a) Today, most of the people in our country acknowledge the importance of education in our lives. Therefore, Mr. Akram is also planning to provide the best education to his son. In this regard, he is planning to set aside a handsome amount for his son education. Suppose the university fee of his son after 10 years will be Rs.200, 000. His bank is offering him 12% interest rate compounded annually. How much amount he has to deposit in his bank account today in order to get Rs.200, 000 from his bank after 10 years? (5 marks)
solution:
Q1 a) - PV = FV/(1 + i)^n
Present Value = Future Value/ (1+(interest))^years
PV = 64394.65
b) Suppose you have some extra funds with you and you want to make investment in bonds with those funds. Currently a 6% coupon bond with face value of Rs.1, 000 is selling at Rs.850. If you want to keep that bond till its maturity (which is one year), then what will be the yield to maturity of this bond? (5 marks)
Qno.1 b) -
Subtract the purchase price (850) from par value (1000) = 150
Divide the discount (150) by the remaining years to maturity (1) of the bond = 150
Add the annualized capital gain (150) to the yearly interest (60), to obtain total annualized return (210)
Subtract annualized capital gain (150) from par (1000), to obtain 850.
Divide the annualized return (210) by the result from the previous step (850), Yield to Maturity 24.70%
Question No. 2:
a) Define GDP deflator and explain how it differs from CPI (Consumer Price Index) although both are used to measure inflation rate in an economy? (4 marks)
Q2 a) – Although at first glance it may seem that CPI and GDP Deflator measure the same thing, there are a few key differences. The first is that GDP Deflator includes only domestic goods and not anything that is imported. This is different because the CPI includes anything bought by consumers including foreign goods. The second difference is that the GDP Deflator is a measure of the prices of all goods and services while the CPI is a measure of only goods bought by consumers.
Solution:
Q2 a) – Although at first glance it may seem that CPI and GDP Deflator measure the same thing, there are a few key differences. The first is that GDP Deflator includes only domestic goods and not anything that is imported. This is different because the CPI includes anything bought by consumers including foreign goods. The second difference is that the GDP Deflator is a measure of the prices of all goods and services while the CPI is a measure of only goods bought by consumers.
b) Suppose you are given the responsibility to calculate the inflation rate prevailing in an economy.
You, along with your team members, collect the following data related to that particular economy:
Years Nominal GDP Real GDP
2009 Rs. 48,300 Rs. 46,200
2010 54,400 51,000
2011 59,300 53,000
How you will measure the inflation rate based on the above data? (6 marks)
Note: You are required to provide complete working and formulas while calculating GDP deflator and Inflation rate.
Solution:
b) – GDP Deflator = (Nominal GDP / Real GDP) ×100
Inflation rate = (Current Year’s GDP Deflator – Previous Year’s GDP Deflator) / Previous Year’s GDP Deflator X 100
Inflation Rate
n.a
2.1%
4.9%
plz koi bata de ytm kese nikle gi or iska formula kya ha
The formula for yield to maturity is:
Price = Coupon payment + Face value
(1+i)^n^{ } (1+i)^n^{}
here, price = 850
face value = 1000
coupon payment = 6% *1000 = 60
putting values
850 = 60 + 1000
(1+i)^1^{ } (1+i)^1
850 = 1060 / (1+i)^1
(1+i) = 1060 / 850
1+i = 1.2470
i = 1.2470 - 1 = 0.2470 = 24.70%
so YTM = 24.70%
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