[sami.mrq]

Please help i cant find the answer in the solution :S

Am using Becker, F5 Bonds simulation the first question, why we are using the market interest rate for both principle payments and the interest payment ( %4) ????? i believe that we should take the 5% for the principle payments right ??

FAR 70, 80
BEC 71, 81
AUD 70, 70, 70, 87 ffft
REG 78

[Anonymous]

errrr : have u read or listen to the lectures carefully??

baiscally we always use market interest rate ( mr) then coupon interest rate (IR)

if MR> IR = Bond Discounts

If MR< IR = Bond premium

[sami.mrq]

Nam, did you read my question ?? i know when the bonds are at premium or discount no need to explain

My question is at both premium or discount we use IR for the principle payments, which is fixed !

and we use the MR for the interest expense along the life of the bonds, which is increase or decrease…

At simulation 1 , F5 , WHY DID WE USED THE MR FOR BOTH PRINCIPLE AND PAYMENTS ?!

FAR 70, 80
BEC 71, 81
AUD 70, 70, 70, 87 ffft
REG 78

[gobias]

Sim 1 asks you to calculate the present value of the bond. You always use the market rate to calculate the present value of the bond. The bond is going to sell at the market rate, so why would you use the stated rate in discounting the principal? You use the stated rate to calculate the amount of each principal payment.

F - 86
R - 90
A - 97
B - 91

[Author]

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