Question
Q#2 (5 Marks Total; 25 Minutes) Mary hopes to accumulate an amount of $75,000.00 by the end of Year 10. Mary's Grand-Mother - Sally
Q#2 (5 Marks Total; 25 Minutes) Mary hopes to accumulate an amount of $75,000.00 by the end of Year 10. Mary's Grand-Mother - Sally - gave Mary $10,000.00 on Day I of Year I as a birthday present. On Day I of Year II, Mary invested the $10,000.00 at a rate of 6% for each year from Year II to the end of Year 10. Required: (a) Will Mary be successful in achieving her goal of $75,000.00 by the end of Year 10? Why or why not....explain your answer. {3 marks] (b) If Mary is not successful under (a), at what rate of interest would Mary need to invest the $10,000 on Day I of Year II in order to achieve her goal of $75,000 at the end of Year 10? [2 marks] On December 31, 2021, Linda purchased from Wendy a $1,000 par value bond ("the Bond") issued by ABC Ltd. ("ABC"). ABC issued the Bond on July 1, 2020. The Bond as issued by ABC had a 15 year maturity period. Linda was attracted to the Bond because she knew that she would receive $75.00 in interest twice per year. Linda has always followed the investment advice given to her by her Father, who advised Linda that a yield of 8% would always be adequate to satisfy her investment needs. Required: (a) What price did Linda pay for the Bond? {5 Marks] (b) What price would Linda have paid for the Bond if she had received interest only once per year? [5 marks]
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