Having an opportunity to acquire a certain bond that has a face value of P1M and matures in 5 years, Lenard decided to buy the bond. This means that when the bond reached its maturity date, he will be receiving P1.2M. The bond is contracted at a foxed nominal rate of 16% and interest payments to be paid quarterly. On the other hand, Lenard would like to earn an 18% nominal interest compounded quarterly. Given the scenario, determine how much Lenard should be willing to pay to gain the bond.
Having an opportunity to acquire a certain bond that has a face value of P1M and matures in 5 years, Lenard decided to buy the bond. This means that when the bond reached its maturity date, he will be receiving P1.2M. The bond is contracted at a foxed nominal rate of 16% and interest payments to be paid quarterly. On the other hand, Lenard would like to earn an 18% nominal interest compounded quarterly. Given the scenario, determine how much Lenard should be willing to pay to gain the 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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Having an opportunity to acquire a certain bond that has a face value of P1M and matures in 5 years, Lenard decided to buy the bond. This means that when the bond reached its maturity date, he will be receiving P1.2M. The bond is contracted at a foxed nominal rate of 16% and interest payments to be paid quarterly. On the other hand, Lenard would like to earn an 18% nominal interest compounded quarterly. Given the scenario, determine how much Lenard should be willing to pay to gain the bond.
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