Question
A young engineering company is a subcontractor in an effort to develop technology that will reliably detect and respond to release of a nuclear weapon.
A young engineering company is a subcontractor in an effort to develop technology that will reliably detect and respond to release of a nuclear weapon. The company is in need of additional funding and issues a series of $1,000 face value bonds that pay a nominal annual rate of 6% with quarterly payments. The bond matures in 4 years.
A) If you buy one bond for $915 and keep it until maturity, what is your effective annual rate of return?
B)If you buy one bond for $915, but need to sell it immediately after the 8th interest payment for $915, what is your effective annual rate of return?
C)If your desired rate of return is 10% compounded quarterly and you plan to keep the bond until maturity, what would be the purchase price for the bond?
D) You buy the bond for $1,000, and decide to sell it immediately after the 8th interest payment. If you want to earn 10% per year compounded quarterly on your investment, what must be your selling price?
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