Question
A bond is a promise to pay its holder fixed amounts of money at specified times in the future.Suppose you have a chance to buy
A bond is a promise to pay its holder fixed amounts of money at specified times in the future.Suppose you have a chance to buy a bond that pays the following amounts in interest and principal. After one year, you will receive a series of annual interest payments of $1040 for 10 years.At the time] you receive the last interest payment you will receive the principal value of the bond of $20,000.
If the rate on interest is 7%, what's the maximum amount you would be willing to pay for the bond? If the rate of interest were 10%, what would be the price of the bond?
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