University of florida marketing graduate

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Marie Snell recently inherited some bonds (face value $200,000) from her father, and soon thereafter she became engaged to Sam Spade, a University of Florida marketing graduate. Sam wants Marie to cash in the bonds so the two of them can use the money to "live like royalty" for three years in Monte Carlo. The 12 percent annual coupon bonds mature on January 1, 2020, and it is now January 1, 2000 (20 years). Interest on these bonds is paid annually on December 31 of each year, and current market interest rates are 6%. If Marie sells her bonds now and puts the proceeds into an account which pays 2 percent compounded annually, what would be the largest equal annual amounts she could withdraw for three years, beginning today (i.e., three payments, the first payment today and the second payment one year from today and the third two years from today)?

Reference no: EM131099451

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