The U.S. government issues bonds called Treasury Bonds to fund its operations. That is, the capital market pays the U.S. government money now in exchange for promised cash flows in the future. U.S. government bonds are risk free. Suppose the U.S. issue a bond that promises to pay $50 per year at the end of each of the next 5 years. The bond also promises to pay sa single payment of $1,000 at the end of 5 years. If the appropriate discount rate for this bond (called the risk-free rate) is 3%, what is the price of this bond in the capital market?

Answer rating: 100% (QA)

Certainly We can calculate the present value of all the cash ... View the full answer