An engineer planning for retirement is considering purchasing a savings bond with a face value of $50,000 and a bond interest rate (coupon rate) of 12% per year payable semiannually with a maturity date 10 years from now. The engineer's MARR is 10% per six-month period. (a) Would you recommend that the engineer purchase the bond if the purchase price is $36,000? (b) Suppose the engineer purchases the bond for $36,000 and is offered $36,000 for it five years later. Would you recommend selling the bond?

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Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.