Question $3$

An investor is considering between purchasing a Treasury Bond and investing in a certificate at a bank. The Treasury bond has a $10-$year maturity, a face value of $$20,000,$ and yearly coupon payments of $$200(10$ total, starting at the end of year $1).$ The bank certificate pays an annual interest rate of $10\%$ and can be renewable for $10$ years.

a$)$ What is the future value of investing $$8000$ in the bank certificate for $10$ years?

b$)$ How much would you be willing to pay today for the Treasury Bond?

c$)$ What is the future value of the Treasury Bond in $10$ years?

d$)$ Assuming you can purchase the Treasury Bond today at the price determined in b$)$ and that the interest rate remains at $10\%,$ would you prefer to purchase the bond or invest $$8,000$ in the bank certificate? Explain why.