Choice of three financial assets

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1. A $50,000 discount bond selling for $33,428 and maturing in 9 years has a yield to maturity of?

2. Determine the annual return on a $50,000 discount bond that you originally purchased for $27,400 and sold 5 years later for $33,500.

3. Suppose that you are a saver with a choice of three financial assets that are identical in every way except their nominal interest rate and taxability. Calculate the after tax real yield for each of the following three assets and choose which of the three assets is the best option if inflation is expected to be 2.25% annually.

  • Asset 1: Interest rate 9%, interest taxed at 45%
  • Asset 2: Interest rate 8%, interest taxed at 33%
  • Asset 3: Interest rate 6.0%, interest taxed at 0%

Reference no: EM131263523

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