4) You make a one time investment in the following way: you purchase a 50 year bond with semiannual coupons, face value of $12,000, a coupon rate of 7-(2) =4% and a yield rate of ¿(2) = 6%. Immediately after receiving each coupon you reinvest the coupon into an account earning an interest rate of ¿ (2) If the total from this investment after 50 years (AV of coupons + redemption) is $160,000 then find ¿(2) and find the equivalent effective annual interest rate over the 50 year period.
4) You make a one time investment in the following way: you purchase a 50 year bond with semiannual coupons, face value of $12,000, a coupon rate of 7-(2) =4% and a yield rate of ¿(2) = 6%. Immediately after receiving each coupon you reinvest the coupon into an account earning an interest rate of ¿ (2) If the total from this investment after 50 years (AV of coupons + redemption) is $160,000 then find ¿(2) and find the equivalent effective annual interest rate over the 50 year period.
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:4) You make a one time investment in the following way: you purchase a 50 year bond
with semiannual coupons, face value of $12,000, a coupon rate of 7-(2) =4% and a yield rate of
¿(2) = 6%. Immediately after receiving each coupon you reinvest the coupon into an account
earning an interest rate of ¿ (2) If the total from this investment after 50 years (AV of coupons + redemption)
is $160,000 then find ¿(2) and find the equivalent effective annual interest rate over the 50 year period.
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