You own a 4 year bond that has a face value of $12,000 and pays 8% å year in interest, once a year, at the end of the year. Two years after buying it, the interest rate increases to 10%. You do not want to wait 2 more years to get your principle of $12,000 back because you really need the money, so you decide to sell it on the open market. 1. How much can you sell it for? 2. Would it be a capital loss or gain and how much? How much is the capital gain or loss?
You own a 4 year bond that has a face value of $12,000 and pays 8% å year in interest, once a year, at the end of the year. Two years after buying it, the interest rate increases to 10%. You do not want to wait 2 more years to get your principle of $12,000 back because you really need the money, so you decide to sell it on the open market. 1. How much can you sell it for? 2. Would it be a capital loss or gain and how much? How much is the capital gain or loss?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 6P
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![Use Excel or Google Open Source Spreadsheet for this problem:
You own a 4 year bond that has a face value of $12,000 and pays 8% a
year in interest, once a year, at the end of the year. Two years after buying
it, the interest rate increases to 10%. You do not want to wait 2 more years
to get your principle of $12,000 back because you really need the money,
so you decide to sell it on the open market.
1. How much can you sell it for?
2. Would it be a capital loss or gain and how much? How much is the
capital gain or loss?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F51bede7c-120b-4d00-9a62-54a30e43be29%2Fd76b9976-c7db-4a34-bddf-9ab6e5ec86b5%2Frneqve_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Use Excel or Google Open Source Spreadsheet for this problem:
You own a 4 year bond that has a face value of $12,000 and pays 8% a
year in interest, once a year, at the end of the year. Two years after buying
it, the interest rate increases to 10%. You do not want to wait 2 more years
to get your principle of $12,000 back because you really need the money,
so you decide to sell it on the open market.
1. How much can you sell it for?
2. Would it be a capital loss or gain and how much? How much is the
capital gain or loss?
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