2. Bob purchases a 10-year 1000 par value bond which pays 6% coupons annually. The redemption value and the price of the bond are both 1000. Bob reinvests the coupons at 5%. (a) How much will he have in total in 10 years? (b) What yield rate will he have earned on his investment of 1000?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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2.
Bob purchases a 10-year 1000 par value bond which pays 6% coupons
annually. The redemption value and the price of the bond are both 1000. Bob
reinvests the coupons at 5%.
(a) How much will he have in total in 10 years?
(b) What yield rate will he have earned on his investment of 1000?
Transcribed Image Text:2. Bob purchases a 10-year 1000 par value bond which pays 6% coupons annually. The redemption value and the price of the bond are both 1000. Bob reinvests the coupons at 5%. (a) How much will he have in total in 10 years? (b) What yield rate will he have earned on his investment of 1000?
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