Castle Company’s pension fund projected that a significant number of its employees would take advantage of a retirement program the company plans to offer in 10 years. Anticipating the need to fund these pensions, the firm bought zero coupon Government of Canada bonds maturing in 10 years. When these instruments were originally issued, they were 6% semiannual 30-year bonds. The stripped bonds are currently priced to yield 3.75%. Their total maturity value is $18,000,000. What is their total cost (price) to Castle today?
Castle Company’s pension fund projected that a significant number of its employees would take advantage of a retirement program the company plans to offer in 10 years. Anticipating the need to fund these pensions, the firm bought zero coupon Government of Canada bonds maturing in 10 years. When these instruments were originally issued, they were 6% semiannual 30-year bonds. The stripped bonds are currently priced to yield 3.75%. Their total maturity value is $18,000,000. What is their total cost (price) to Castle today?
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
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Castle Company’s pension fund projected that a significant number of its employees would take advantage of a retirement program the company plans to offer in 10 years. Anticipating the need to fund these pensions, the firm bought zero coupon Government of Canada bonds maturing in 10 years. When these instruments were originally issued, they were 6% semiannual 30-year bonds. The stripped bonds are currently priced to yield 3.75%. Their total maturity value is $18,000,000. What is their total cost (price) to Castle today?
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