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An investor has the choice of purchasing a 15-year annual bond, that has annual coupon payment of $65, each year plus its par-value in the
An investor has the choice of purchasing a 15-year annual bond, that has annual coupon payment of $65, each year plus its par-value in the final year. The current price of the bond is $1,311.17. If the investor, believes they can re-invest the coupon payments at a 2.75% interest rate. How much money will the investor have in 15 years? Suppose there is a zero-coupon bond, that has the same yield to maturity, and maturity date as the 15-year bond. How, many zero- coupon bonds would the investor need to purchase to have the same total cash flow, as the 15-year coupon paying bond. (Assume the investor can buy partial bonds.)
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