The US government sells 2 types of savings bonds. One is called a series EE bond and has a fixed rate. The other is called an I bond-the / stands for inflation - and the rate adjusts based on inflation. These are both zero-coupon bonds and are different from other bonds because they do not have a "face value"/"par value". This is because investors can purchase the bonds for any amount between $25 and $10,000 so the redemption value (future value) of the bond depends on the dollar amount invested and the interest rate. Interest on these bonds compounds semi-annually. (More information on US Savings bonds) Suppose that you invest $500 in a Series EE bond with a yield to maturity of 2.44%. What will be the bond's value in 8 years?
The US government sells 2 types of savings bonds. One is called a series EE bond and has a fixed rate. The other is called an I bond-the / stands for inflation - and the rate adjusts based on inflation. These are both zero-coupon bonds and are different from other bonds because they do not have a "face value"/"par value". This is because investors can purchase the bonds for any amount between $25 and $10,000 so the redemption value (future value) of the bond depends on the dollar amount invested and the interest rate. Interest on these bonds compounds semi-annually. (More information on US Savings bonds) Suppose that you invest $500 in a Series EE bond with a yield to maturity of 2.44%. What will be the bond's value in 8 years?
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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Transcribed Image Text:The US government sells 2 types of savings bonds. One is called a series EE bond and has a fixed rate. The other is called
an I bond - the / stands for inflation - and the rate adjusts based on inflation. These are both zero-coupon bonds and are
different from other bonds because they do not have a "face value"/"par value". This is because investors can purchase the
bonds for any amount between $25 and $10,000 so the redemption value (future value) of the bond depends on the dollar
amount invested and the interest rate. Interest on these bonds compounds semi-annually. (More information on US Savings
bonds)
Suppose that you invest $500 in a Series EE bond with a yield to maturity of 2.44%. What will be the bond's value in 8 years?
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