A 10-year, 8.00%, $4,000 bond that pays dividends quarterly can be purchased for $3,515. This means that $3,515 is spent on the bond now. Every quarter, $80.00 is provided to the purchaser as the dividend. After 10 years, $4,000 is given to the purchaser. If the bond is purchased and pays as scheduled, which of the following ranges of effective rate of return will the purchaser receive?
A 10-year, 8.00%, $4,000 bond that pays dividends quarterly can be purchased for $3,515. This means that $3,515 is spent on the bond now. Every quarter, $80.00 is provided to the purchaser as the dividend. After 10 years, $4,000 is given to the purchaser. If the bond is purchased and pays as scheduled, which of the following ranges of effective rate of return will the purchaser receive?
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:A 10-year, 8.00%, $4,000 bond that pays dividends quarterly can be purchased for $3,515.
This means that $3,515 is spent on the bond now. Every quarter, $80.00 is provided to the
purchaser as the dividend.
After 10 years, $4,000 is given to the purchaser.
If the bond is purchased and pays as scheduled, which of the following ranges of effective rate of
return will the purchaser receive?
8.50% -9.55%
8.00% - 8.50%
10.81% -12.81%
9.80% - 10.80%
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