Find how much should be willing to pay for the bond

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Reference no: EM132735971

Assume that you are considering purchasing a certain U.S. Treasury bond that matures in 10 years and has a face value of $15,000. This means that you will receive $15,000 cash when the bond's maturity date is reached. The bond stipulates a fixed nominal interest rate of 8% per year, but interest payments are made to the bondholder every three months; therefore, each payment amounts to 2% of the face value.

Problem 1: Let's say you would like to earn 12% nominal interest (compounded quarterly) per year on this investment. How much should you be willing to pay for the bond?

Problem 2: To solve the bond price problem, the formula you can use is

Reference no: EM132735971

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