Eight years ago, Burt Brown lee purchased a U.S. government bond that pays 2.30 percent interest. The

Question:

Eight years ago, Burt Brown lee purchased a U.S. government bond that pays 2.30 percent interest. The face value of the bond was $1,000.

a. What is the dollar amount of annual interest that Burt received from his bond investment each year?

b. Assume that comparable bonds are paying 1.8 percent. What is the approximate dollar price for which Burt could sell his bond?

c. In your own words, explain why Burt’s bond increased or decreased in value.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...