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Making the assumption of no compounding interest, suppose you purchase a perpetuity bond from Lateralus Inc. for $4, 000 with an annual coupon rate of
Making the assumption of no compounding interest, suppose you purchase a perpetuity bond from Lateralus Inc. for $4, 000 with an annual coupon rate of 3%. Specify all answers to the nearest dollar, and assume a discount rate equal to that of the current interest rate. What is the yearly return on your $4, 000 investment? Changes in the economy push interest rates up from 3% to 5%. For how much can you sell your bond following this change in market interest rates? Suppose that interest rates instead change from 3% to 1% . For what price will you be able to sell your bond following this change in market interest rates? Identify each type of retirement account according to whether the individual contributor pays income taxes on the contribution (posttax) or not (pretax) at the time of the contribution. Posttax Pretax traditional IRA Social Security 401(k)
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