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1. Victoria, a UGA engineering student decided to finance part of her education by investing in bonds. Delta Inc, a local manufacturing company issued
1. Victoria, a UGA engineering student decided to finance part of her education by investing in bonds. Delta Inc, a local manufacturing company issued a 10% coupon bond that pays interest (dividends) every 3 months. Even though the financial position of Delta appears shaky based on Victoria's own due diligence analysis, she took the risk and bought 10 of delta's bonds each with a face value of $2000 that matures in ten years. She spent a total of $27,831.73 on all the ten $2000 face value bonds. i. Draw the cash flow diagram for Victoria's investment assuming she kept all the bonds till maturity. Calculate the nominal market interest rate at the time Victoria made her purchase. Nominal rate a True to Victoria's own analysis, Delta defaulted on the first-year interest payments and did not pay any interest for the first year. Delta however managed to the interest for the next 4 years and then Victoria was able to sell the bond to Nina at that time for $25,000. Draw the Cash flow diagram for Victoria till she sold the bond. What rate of return did she make on her investment? Rate of return- If Nina kept bond to maturity, what rate of return did she receive?
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