A municipal bond with a face value of $10,000 was issued today with an interest rate of 6% per year payable semiannually. The bond matures 20 years from now. If an investor paid $9,000 for the bond and holds it to maturity, all of the following equations will yield the correct semiannual rate of return except: (a) 0 = −9000 + 300(P/A,i*,40) + 10,000(P/F,i*,40) (b) 0 = −9000(F/P,i*,40) + 300(F/A,i*,40) + 10,000 (c) 0 = −9000(A/P,i*,40) + 300 + 10,000(A/F,i*,40) (d) 0 = −9000 + 600(P/A,i*,40) + 10,000(P/F,i*,40)
A municipal bond with a face value of $10,000 was issued today with an interest rate of 6% per year payable semiannually. The bond matures 20 years from now. If an investor paid $9,000 for the bond and holds it to maturity, all of the following equations will yield the correct semiannual rate of return except: (a) 0 = −9000 + 300(P/A,i*,40) + 10,000(P/F,i*,40) (b) 0 = −9000(F/P,i*,40) + 300(F/A,i*,40) + 10,000 (c) 0 = −9000(A/P,i*,40) + 300 + 10,000(A/F,i*,40) (d) 0 = −9000 + 600(P/A,i*,40) + 10,000(P/F,i*,40)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
A municipal bond with a face value of $10,000
was issued today with an interest rate of 6% per
year payable semiannually. The bond matures
20 years from now. If an investor paid $9,000 for
the bond and holds it to maturity, all of the following
equations will yield the correct semiannual
(a) 0 = −9000 + 300(P/A,i*,40)
+ 10,000(P/F,i*,40)
(b) 0 = −9000(F/P,i*,40) + 300(F/A,i*,40)
+ 10,000
(c) 0 = −9000(A/P,i*,40) + 300
+ 10,000(A/F,i*,40)
(d) 0 = −9000 + 600(P/A,i*,40)
+ 10,000(P/F,i*,40)
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