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Eugene is considering investing in a bond that matures is 3 years. The average YTM on similar issues is 9%. A series of $40 as

Eugene is considering investing in a bond that matures is 3 years. The average YTM on similar issues is 9%. A series of $40 as coupons are paid out semiannually. The face value of the bond is $1,000.

a. What is the fair price of the bond? Show your work. To determine the price of the bond use the annuity formula.

b. What is the amount of money you will have at the maturity of the bond if the coupons received are invested at an annual interest rate of 10%? Use the annuity formula for credit.

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