Purchase Solution

Bonds

Not what you're looking for?

Ask Custom Question

The following information applies to all three parts:

A bond with a face value of $10,000 pays $600 in interest every six months for 10 years and a lump sum of $10,000 at the end of the tenth year. The current market requires 10% interest compounded semiannually.

1) What would an invester be willing to pay now for the $10,000 at the end of the 10 tenth year?

$1,486, $3,769, $3,855, or $61,446

I believe the answer is - $3,855 - please advise of answer & show why - thanks!

2) What would an invester be willing to pay for $10,000 bond?

more than $10,000, $10,000, Less than $10,000, or More information is needed to determine the amount

I believe - more than $10,000 - please advise of answer & show why - thanks

3) The $600 semiannual interest payments?

have a present value of $12,000, reflect the actual rate of interest received by the invester, are paid at the zero point, or are an example of an annuity - please advise of answer & show why - thanks!

Purchase this Solution

Solution Preview

1) What would an investor be willing to pay now for the $10,000 at the end of the 10 tenth year?
$1,486, $3,769, $3,855, or $61,446
I believe the answer is - $3,855 - please advise of answer & show why - thanks!

By a financial calculator, we input:
FV = 10,000
Interest Rate = 10% / 2 = 5%
Number of periods = ...

Purchase this Solution


Free BrainMass Quizzes
Operations Management

This quiz tests a student's knowledge about Operations Management

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Introduction to Finance

This quiz test introductory finance topics.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.