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Investment: Bonds and Year-End Interest

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You wish to retire a $10,000,000 bond that can be called in 5 years for 110 percent of par value, or $11,000,000. You also need to make year-end interest payments of $700,000 per year in each of the next five years. If you can invest money at 8 percent, how much money must you set aside today to meet these obligations?

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Solution Summary

This solution illustrates how to compute the amount of funds needed today to meet future obligations.

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