The nominal interest rate paid by comparable investments

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Reference no: EM131044340

You have the opportunity to purchase a commercial bond. The face value of the bond is $1000 and the bond interest rate is 10%. the bond pays interest every six months and will mature after five years .

a) Compute the highest price that should be paid for the bond if the nominal interest rate paid by comparable investments is 8%.

b) If you decide to sell the bond two years after the purchase what is the highest price that you could ecpect to be able to sell it for of the market nominal interest rate has increased from 8% to 9% per year.

c) What is the amount received at the end of the fifth year if the market interest rate is less that 12%.

Reference no: EM131044340

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