Question 4 (3 points) Consider a 35-year coupon bond with a face value of $1,000 that pays $80 annual coupons (beginning one year from today). Assume that you invest each coupon in a bank that pays 8% interest. By the maturity date: A) Calculate the future value of coupons reinvested at 8% (Use all decimals on your calculations and include your answer with 2 decimals. Do not include symbols or comma separators eg. Assume the correct answer is $1,289.54632, so input your answer as 1289.55) B) How much interest is earned for reinvesting the coupons? (Use all decimals in your calculations and include your answer with 2 decimals. Do not include symbols or comma separators eg. Assume the correct answer is $1,289.54632, so input your answer as 1289.55) C) Calculate the interest earned for reinvesting coupons, as a proportion of all money received for owning the bond until maturity. (Use all decimals in your calculations and include your answer in percentual form with 2 decimals. Do not include symbols or comma separators eg. Assume the correct answer is 12.68741%, so input your answer as 12.69)
Question 4 (3 points) Consider a 35-year coupon bond with a face value of $1,000 that pays $80 annual coupons (beginning one year from today). Assume that you invest each coupon in a bank that pays 8% interest. By the maturity date: A) Calculate the future value of coupons reinvested at 8% (Use all decimals on your calculations and include your answer with 2 decimals. Do not include symbols or comma separators eg. Assume the correct answer is $1,289.54632, so input your answer as 1289.55) B) How much interest is earned for reinvesting the coupons? (Use all decimals in your calculations and include your answer with 2 decimals. Do not include symbols or comma separators eg. Assume the correct answer is $1,289.54632, so input your answer as 1289.55) C) Calculate the interest earned for reinvesting coupons, as a proportion of all money received for owning the bond until maturity. (Use all decimals in your calculations and include your answer in percentual form with 2 decimals. Do not include symbols or comma separators eg. Assume the correct answer is 12.68741%, so input your answer as 12.69)
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
Related questions
Question
Transcribed Image Text:Question 4 (3 points)
Consider a 35-year coupon bond with a face value of $1,000 that pays $80 annual coupons (beginning one
year from today). Assume that you invest each coupon in a bank that pays 8% interest. By the maturity date:
A) Calculate the future value of coupons reinvested at 8% (Use all decimals on your calculations and
include your answer with 2 decimals. Do not include symbols or comma separators eg. Assume the correct
answer is $1,289.54632, so input your answer as 1289.55)
B) How much interest is earned for reinvesting the coupons? (Use all decimals in your calculations and
include your answer with 2 decimals. Do not include symbols or comma separators eg. Assume the correct
answer is $1,289.54632, so input your answer as 1289.55)
C) Calculate the interest earned for reinvesting coupons, as a proportion of all money received for
owning the bond until maturity. (Use all decimals in your calculations and include your answer in
percentual form with 2 decimals. Do not include symbols or comma separators eg. Assume the correct
answer is 12.68741%, so input your answer as 12.69)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education