A bond is purchased for ($8),628.12. It is kept for 5 years, and interest is received at

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A bond is purchased for \($8\),628.12. It is kept for 5 years, and interest is received at the end of each year. Immediately following the owner’s receipt of the fifth interest payment, the owner sells the bond for \($500\) more than its par value.

The bond rate of interest is 8 percent, and the owner’s money yields a 10 percent interest rate.

a. Draw a clear, completely labeled cash flow diagram of the entire bond transaction using dollar amounts where they are known and using $X to represent the bond’s face value.

b. Determine the bond’s face value.

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Principles Of Engineering Economic Analysis

ISBN: 9781118163832

6th Edition

Authors: John A. White, Kenneth E. Case, David B. Pratt

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