1. Sam has the opportunity to purchase a US Treasury bond that matures in eight years and has a face value of $10,000. This means that Sam will receive 10,000 cash when the bond's maturity date is reached. In addition, the bond stipulates a fixed nominal interest rate of 8% of the face value. The interest payments are made to the bondholder every three months so each payment amounts to 2% of the face value. He would like to earn 10% interest compounded quarterly on his investment because interest rates in the economy have risen since the bond was issued. 
2. 
   
3. How much should Sam be willing to pay now for the bond? Draw a cash flow diagram.

Answer rating: 100% (QA)

We have PMT 00210000 200 n 84 32 FV 10000 I 104 25 Price of the b... View the full answer