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Suppose you invest $1,000 in an 8% annual coupon bond for 10 years. Reinvesting at 89% will result in an ending wealth of: Wealth
Suppose you invest $1,000 in an 8% annual coupon bond for 10 years. Reinvesting at 89% will result in an ending wealth of: Wealth = Future value of all coupon payments + Face value received at the end =$80 x FVIFA (10,8%)+ $1,000 = = $2,159 This ending wealth is composed of three componets: Face value of the coupons, interest earned on the coupons, and the face value of the bond. How much of this ending wealth is due to interest earned on interest? 12:04 pm
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Principles of managerial finance
Authors: Lawrence J Gitman, Chad J Zutter
12th edition
9780321524133, 132479540, 321524136, 978-0132479547
