Mah Gulang has the opportunity to purchase a treasury bond that matures in eight years and has a face value of $10,000. This means that Mah Gulang will receive $10,000 cash when the bond's maturity date is reached. Interest payments , amounting to 2% of the face value, will be made to Mah Gulang quarterly. Mah Gulang would like to earn 10% nominal interest (compounded quarterly) per year in this investment, because interest rates in the economy has risen since the bond was issued. How much should Mah Gulang be willing to pay for the bond?
Mah Gulang has the opportunity to purchase a treasury bond that matures in eight years and has a face value of $10,000. This means that Mah Gulang will receive $10,000 cash when the bond's maturity date is reached. Interest payments , amounting to 2% of the face value, will be made to Mah Gulang quarterly. Mah Gulang would like to earn 10% nominal interest (compounded quarterly) per year in this investment, because interest rates in the economy has risen since the bond was issued. How much should Mah Gulang be willing to pay for the bond?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Mah Gulang has the opportunity to purchase a treasury bond that matures in eight years and has a face value of $10,000. This means that Mah Gulang will receive $10,000 cash when the bond's maturity date is reached. Interest payments , amounting to 2% of the face value, will be made to Mah Gulang quarterly.
Mah Gulang would like to earn 10% nominal interest (compounded quarterly) per year in this investment, because interest rates in the economy has risen since the bond was issued. How much should Mah Gulang be willing to pay for the bond?
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