Question
To purchase a $10,000 par value 10 year bond, yielding an annual nominal rate of 8% compounded semiannually, and paying semiannual coupons at an annual
To purchase a $10,000 par value 10 year bond, yielding an annual nominal rate of 8% compounded semiannually, and paying semiannual coupons at an annual nominal rate of 6%, Janet borrows from a bank at an effective annual rate of 2%. She has to pay the amount she borrows plus the interest in one single payment at the end of 10 years. Janet reinvests all coupon payments as she receives them in a savings account that gains interest at a nominal rate of 10% convertible semiannually. At the end of 10 years, how much remains from Janets investment after she pays off all she owes on the loan by using the redemption amount of the bond and the accumulated amount in her savings account? write the formula and show work.
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