Referring to the bond described in Problem 8, assume that the bond 's interest payments were reinvested at a rate of 5 per annum a What would be the future value of the reinvested coupons (there are 10 years of coupons received between 2005 and 2014) b Given the purchase price of $850, the maturity...

a The future value of reinvested interest would be 2 nd CLRTVM 90 PMT 10 N 5 I COMP FV 1132 ...

Referring to the bond described in Problem 8, assume that the bond's interest payments were reinvested at

Question:

Referring to the bond described in Problem 8, assume that the bond's interest payments were reinvested at a rate of 5% per annum.
a. What would be the of the reinvested coupons (there are 10 years of coupons received between 2005 and 2014).
b. Given the purchase price of $850, the value of $1,000 added to the of the reinvested coupons, what was the bond's average annual compound return?
c. Repeat this calculation assuming bond interest was reinvested at 15% per annum. What was the bond's average annual compound return?
d. What do you conclude from these two calculations?
Future Value
Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth... 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...