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Acme is selling 8.00%, $1000. Bonds for payment in 15.0 years (face amount of $1000, coupon rate of 8.00% with a 15-year maturity). That is, the bond will pay 8.00% of the principle at the end of each year and then 108% at the end of the 15th year. What is the equivalent cost of a 10.00% bond under the same conditions, i.e., how much would you have to pay for a 10.00% bond that provides the same income as the 8.00% bond? That is, determine the present value of the payments from an 8.00% bond, but at a 10.00% interest rate. Assume the interest is determined only at the end of each year. ($847.88) WITHOUT USING EXCEL

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91231929

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