Suppose that Ryan can buy bond A or bond B, both of which have face value...
Suppose that Ryan can buy bond A or bond B, both of which have face value of $1000. Bond a pays a 4% coupon rate annually in perpetuity, and Bond B pays an annual 10% coupon rate and matures in 1 year. Ryan is different between bond A and bond B. What is the real interest rate in this economy?
The answer is apparently 3.8%
How do you do this problem? I don't understand how they got the answer.
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Suppose that Ryan can buy bond A or bond B, both of which have
face value...
4(b) You have an opportunity to buy a bond with a face value of $10,000 and...
4(b) You have an opportunity to buy a bond with a face value of $10,000 and coupon rate of 14%, payable semi-annually. NOTE: Interest per 6-month period is 7% of Face Value (i.e. $10,000x0.07 = $700 per 6-month period). (i) If the bond matures in five years and you can currently buy one for $8,000, what is your IRR for this investment? (ii) If your MARR for this type of investment is 20%, should you buy the bond?
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