Bond A: A 9% bond with a 1,000 par value and coupons payable semi-annually is redeemable...

     

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Bond A: A 9% bond with a 1,000 par value and coupons payable semi-annually is redeemable at maturity for 1,100. At a purchase price of 1120, the bond yields a nominal annual interest rate of i compounded semi-annually. Bond A will be redeem at n. Bond B: A 8% bond with a 1,000 par value and coupons payable semi-annually is redeemable at maturity for 1,090. At a purchase price of P, the bond yields a nominal annual interest rate of i+0.02, compounded semi-annually. Bond B will be redeem at n. Bond C: A 7% bond with a 1,000 par value and coupons payable semi-annually is redeemable at maturity for 1,125. At a purchase price of Q, the bond yields a nominal annual interest rate of i +0.01, compounded semi-annually. Bond C will be redeem at n. Given summation of purchase price of A, B and C equal to 2779.48 Determine i and n. Bond A: A 9% bond with a 1,000 par value and coupons payable semi-annually is redeemable at maturity for 1,100. At a purchase price of 1120, the bond yields a nominal annual interest rate of i compounded semi-annually. Bond A will be redeem at n. Bond B: A 8% bond with a 1,000 par value and coupons payable semi-annually is redeemable at maturity for 1,090. At a purchase price of P, the bond yields a nominal annual interest rate of i+0.02, compounded semi-annually. Bond B will be redeem at n. Bond C: A 7% bond with a 1,000 par value and coupons payable semi-annually is redeemable at maturity for 1,125. At a purchase price of Q, the bond yields a nominal annual interest rate of i +0.01, compounded semi-annually. Bond C will be redeem at n. Given summation of purchase price of A, B and C equal to 2779.48 Determine i and n.

Answer rating: 100% (QA)

To determine the values of i and n we first need to set up the equations based on the i... View the full answer