Problem #3: A bond with face value of $5,000 pays quarterly interest of 1.5% each period. Twenty six(26) interest payments remain before the bond matures. How much would you be willing to pay forthis bond today if the next interest payment is due now and you want to earn 8% compoundedquarterly on your money?Note: Coupon Rate is 1.5% per quarter. Interest rate is 2% per quarter.

Given in question. Quarterly interest amount Present value of bond

Answered: Problem #3: A bond with face value of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You are saving up for a down payment on a house. You will deposit $600 a month for the next 24 months in a money market fund. How much will you have for your down payment in 24 months if the fund earns 12% APR compounded monthly?
You invest $10,000 in a fund that pays 7% per year for 5 years. How much is in the fund at the end of 5 years if (forgetting leap years and making “convenient” assumptions): a. Compounding is annual? b. Compounding is quarterly? c. Compounding is monthly? d. Compounding is daily?
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