An investor is considering the purchase of a 20 year 7 coupon bond selling for $816 and a par value of $1,000 The yield to maturity for this bond is 9 Answer the below questions (a) What would be the total future dollars if this investor invested $816 for 20 years earning 9 compounded semiannually ...

a To determine the future value of any sum of money invested today we use the below equation P n P 0 1 r n where n number of periods P n future value ...

An investor is considering the purchase of a 20-year 7% coupon bond selling for $816 and a

Question:

An investor is considering the purchase of a 20-year 7% bond selling for $816 and a of $1,000. The yield to for this bond is 9%.
Answer the below questions.
(a) What would be the total future dollars if this investor invested $816 for 20 years earning 9% compounded semiannually?
(b) What are the total payments over the life of this bond?
(c) What would be the total future dollars from the payments and the repayment of principal at the end of 20 years?
(d) For the bond to produce the same total future dollars as in part (a), how much must the interest on interest be?
(e) Calculate the interest on interest from the bond assuming that the semiannual payments can be reinvested at 4.5% every six months and demonstrate that the resulting amount is the same as in part (d). Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...