Issue with rate function

[aaslezak]

I am trying to figure out how I can use the rate function for a problem. It was due last night but I would still like to know if I am using the right function and why it won't compute. I got the first part of the problem and I know it is correct. Here is the problem.

5. Predicting Bond Values
(Use the chapter appendix to answer this problem) Bulldog Bank has just purchased bonds for $106 million that have a par value of $100 million, three years remaining to maturity, and an annual coupon rate of 14 percent. It expects the required rate of return on these bonds to be 12 percent one year from now.

a. At what price could Bulldog Bank sell these bonds one year from now?
Using Present value function
FV = 100000000
Nper = 2
PMT = 0.14 100000000 14000000
Rate = 0.12
PV = ($103,380,102.04)

b. What is the expected annualized yield on the bonds over the next year, assuming they are to be sold in one year?
Using rate function
PV = 106000000.00
FV = 103380102.00
PMT = 0.14 100000000.00 14000000.00
Nper= 1.00
Rate = #NUM!

This is the value for the rate function =RATE(1,14000000,106000000,103380102)

How come I do not get the answer of 10.74 as I am supposed to?

Al

[aaslezak]

I was told by my professor that I was suppose to use the IRR function and the first value has to be negative. How exactly does that function work? Is it just for cash flows or is it for something else.

Al

[MoneyMaker]

b. What is the expected annualized yield on the bonds over the next year, assuming they are to be sold in one year?
Using rate function
pv = 106000000.00
fv = 103380102.00
pmt = 0.14 100000000.00 14000000.00
nper= 1.00
rate = #num!

This is the value for the rate function =rate(1,14000000,106000000,103380102)

how come i do not get the answer of 10.74 as i am supposed to?

Al

=rate(1, 14%*100, -106, 103.38)
10.74%

[MoneyMaker]

I was told by my professor that I was suppose to use the IRR function and the first value has to be negative. How exactly does that function work? Is it just for cash flows or is it for something else.

Al

Hey Al

If you are a paying student at the College or University that you attend, then you are wasting your time and money.

If your study is being financed by the State, then you are given the treatment of United and Unequal Education.

This treatment was created by the State in response to demands of Separate and Equal Education by segregationists in South.

State had a choice of either losing out on its vote bank or to further anger the angry Black integrationist in South

Since it is the State we are talking about, it gave both sides something to cheer about

The integrationist were happy with Unification of students but were left out on Equalness of education

The segregationist were happy with Unequalness of education but were left out of separation of races


This led to creation of an US economy that has to be outsourced to places like the one where the State locked me up 20 years ago without a chance to escape and return back home to Yonkers, New York 10701