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Question 5.T-Y-S.D: A company has issued 10-year bonds, with a face value of $1,...

A company has issued 10 -year bonds, with a face value of \$ 1,000,000, in \$ 1,000 units. Interest at 8 \% is paid quarterly. If an investor desires to earn 12 \% nominal interest (compounded quarterly) on \$ 10,000 worth of these bonds, What would the purchase price have to be? (5.3)

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Desired yield per quarter =12 \% / 4=3 \% ; N=4(10)=40 quarters

\begin{aligned}\mathrm{V}_{N} &=\$ 10,000(P / F, 3 \%, 40)+0.02(\$ 10,000)(P / A, 3 \%, 40) \\&=\$ 10,000(0.3066)+\$ 200(23.1148) \\&=\$ 7,688.96\end{aligned}

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