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With a Series EE U.S. Treasury bond, you pay a particular amount today of, say, $25, and the bond accrues interest over the time you
With a Series EE U.S. Treasury bond, you pay a particular amount today of, say, $25, and the bond accrues interest over the time you hold it. In an interesting (and important) wrinkle, if you hold the bond for 20 years, the Treasury promises to "step up" the value to double your cost. That is, if the $25 bond you purchased and all the accumulated interest earned are worth less than $50, the Treasury will automatically increase the value of the bond to $50. a. Assume you purchased a $50 face value bond, what is the exact rate of return you would earn if you held the bond for 20 years until it doubled in value? b. If you purchased a $50 face value bond and the current interest rate is .10 percent per year, how much would the bond be worth in 10 years? c. Ten years from now, instead of cashing the bond in for its then current value, you decide to hold the bond until it doubles in face value. What rate of return will you earn over the last 10 years? Complete the following analysis. Do not hard code values in your calculations. All answers should be a positive value
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