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Investment Planning 1

Discussion in 'Financial Planning Study Group' started by seven, 17th Nov, 2009.

  1. seven

    seven New Member

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    17th Nov, 2009
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    Location:
    Perth, WA
    Hi All,

    Did any one get the answer for this question for the IP 1 Assignment.
    Jenny owns an RBA bond parcel. She asks you to explain how it is possible that an
    investor can make or lose money on fixed interest investments.
    As part of your explanation, calculate the purchase price of a 10-year Government bond
    parcel with a yield rate of 8.95% p.a. paid as a half-yearly coupon. Assume that the
    prevailing market interest rate is 7.50% p.a. and that the bond parcel has 250 days until
    maturity. Use a parcel price of $100.
     
  2. CJ. Wentworth

    CJ. Wentworth Well-Known Member

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    Cairns, QLD
    I took into consideration the secondary market for fixed interest investments and what would happen to their market price if the interest rate rose.
     
  3. study

    study Member

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    3rd May, 2009
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    Location:
    Adelaide
    CJ - exactly what I did.
    My biggest problem was trying to work out which of the seemingly thousands of formula to use!
     
  4. Young Gun

    Young Gun Guest

    The value of a bond is inversely related to the interest rate.

    When interest rates go, the value of your bond goes down.
    When Interest rates go down, the value of your bond goes up.

    There should be a formula in your text to calculate this. Using their example calculate first the value of the bond, then the value of the bond given a 1% raise/fall in the current market rate to illustrate the inverse relationship.
     
  5. zoupie

    zoupie New Member

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    brisbane,QLD
    what is the face value to calculate or is there a formula that I can use?
     
  6. zoupie

    zoupie New Member

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    11th May, 2012
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    Location:
    brisbane,QLD
    what is the face value and the formula...