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Rate of Return and Future Value

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You have just purchased a 10 year $1000 par value bond. The coupon rate on this bond is 8 percent annually, with interest being paid each six months. If you expect to earn 10 percent simple rate of return on this bond how much did you pay for it?

You expect to receive $1000 at the end of each of the next three years. You will deposit these payments into an account which pays 10 percent compounded semiannually. What is the future value of these payments, that is, the value at the end of the third year?

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Solution Summary

Rate of Return & Future Value are calculated in the case.

$2.19
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