Asked by
Germany Davis
on Dec 07, 2024
Verified
Mirtha Mudflat has sufficient funds to choose one of two investments.The same amount will be invested in either case.Choice one: ten year $100,000 5% Treasury bonds issued to yield 4% per annum,the market rate.Choice two: a risky bond of the same amount that has expected cash flows of $9,000 per year for the same period. What is the issue price of the Treasury bond?
A) $100,000
B) $108,110
C) $92,278
D) $125,000
E) None of the above
Treasury Bonds
Long-term, fixed-interest securities issued by the U.S. government as a way of borrowing money to fund its operations and projects.
Issue Price
The price at which new shares or bonds are offered to the public by a company or government for the first time.
Yield Per Annum
The annual return on an investment, expressed as a percentage of the total investment.
- Apply present value concepts to calculate the worth of bonds, including zero coupon and Treasury bonds.
Verified Answer
TW
Learning Objectives
- Apply present value concepts to calculate the worth of bonds, including zero coupon and Treasury bonds.