1) Zero coupon bonds with a par value of $1,000,000 have a maturity of 10 years and a required rate of return of 9% what is the current price? 2) Louiselle purchased a motor home for $9000 down with the balance to be paid by 60 monthly payments of $1176

1) Computation of the current price of the bond:-

FV = PV*(1+rate)^n

$1,000,000 = PV*(1+9%)^10

PV = $1,000,000 / 2.36736

= $422,410.81

2) We can calculate the present value by using the following formula in excel:-

=-pv(rate,nper,pmt,fv)

Here,

PV = Present value

Rate = 6%/12 = 0.5% (monthly)

Nper = 60 periods (monthly)

Pmt = $1,176.40

FV = $0

Substituting the values in formula:

= -pv(0.6%,60,1176.40,0)

= $59,128.37

Purchase price = $9,000 + $59,128.37

= $68,128.37

3) We can calculate the monthly payment by using the following formula in excel:-

=pmt(rate,nper-pv,fv)

Here,

Pmt = Monthly payment

Rate = 7.5%/12 = 0.625% (monthly)

Nper = 8*12 = 96 periods (monthly)

PV = $30,000

FV = $0

Substituting the values in formula:

= pmt(0.625%,96,-30000,0)

= $416.52