Answered: A 30-year, $1,000 strip bond was issued…

A 30-year, $1,000 strip bond was issued by Sun Oil Company at a yield rate of 8.8% compounded semiannually. How much money did Sun Oil borrow by issuing this bond?

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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Question

A 30-year, $1,000 strip bond was issued by Sun Oil Company at a yield rate of 8.8% compounded semiannually. How much money did Sun Oil borrow by issuing this bond?

Expert Solution

Step 1: Given Value

Compound = Semiannually = 2
Time = t = 30 * 2 = 60
Face Value = fv = $1000
Yield Rate = r = 8.8 / 2 = 4.4%

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