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  3. 1- you just purchased a bond for $800. the bond ha

1- You just purchased a bond for $800. The bond has a face value of $1000, pays...

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Finance

1-

You just purchased a bond for $800. The bond has a face value of$1000, pays $50 in coupons each year, and has a yield to maturityof 7%. If the bond does not default (so you receive all thepromised coupons and the face value at maturity), what will be yourreturn?

0%

5%

7%

12%

2- Suppose that you are now 30 and that you would like $2million at age 65 to fund your retirement. You would like to saveeach year an amount that grows by 5% each year (that is, if yousave $1 this year, you will save $1.05 next year). Assume that thediscount rate is 8%. How much should you start saving at the end ofthis year? (Hint: first calculate the present value of the $2million, then use the growing annuity formula to calculate theamount you must save at the end of this year).

$8,920

$6,473

$15,200

$57,142

Answer & Explanation Solved by verified expert
3.8 Ratings (425 Votes)
1 7 is a correct optionYield to maturity representthe rate of return of a Bond if Bond does    See Answer
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