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ser-zykov [4K]
2 years ago
10

Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $4

0. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Business
1 answer:
Savatey [412]2 years ago
5 0

Answer:

$828.36

Explanation:

As for the information provided,

The value = $1,000

Life = 20 years, since interest is semi annual, effective period = 20 \times \frac{12}{6} = 40 periods.

Semi annual interest = $40

Annual interest = 10%, effective interest rate = 5%

Future Value Interest rate = $40 \times (\frac{1}{(1+0.05)^1} +\frac{1}{(1+0.05)^2} +\frac{1}{(1+0.05)^3} +\frac{1}{(1+0.05)^4} +\frac{1}{(1+0.05)^5} +\frac{1}{(1+0.05)^6} +\frac{1}{(1+0.05)^7} +.................. + \frac{1}{(1+0.05)^4^0} )

= $40 \times 17.159 = $686.36

Future Value of Principal = $1,000 \times \frac{1}{(1 + 0.05)^4^0}

= $1,000 \times 0.142 = $142

Thus, current price of bond = $686.36 + $142 = $828.36

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iogann1982 [59]

Answer:

new net worth = 79.2 billion

Explanation:

given data

net worth = $76.0 billion

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to get here

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2 years ago
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ElenaW [278]

Answer:

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gain surplus from paying a lower price

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