Future Value of re-invested payments and number of bonds An investor has the choice of...
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Future Value of re-invested payments and number of bonds
An investor has the choice of purchasing a 12-year annual bond, that has annual coupon payment of $60, each year plus its par-value in the final year. The current price of the bond is $1,241.58. If the investor, believes they can re-invest the coupon payments at a 5.5% interest rate.
How much money will the investor have in 12 years? ( I have this answer, don't answer this. I need help on the second question)
1983.14 correct.
Suppose there is a zero-coupon bond, that has the same yield to maturity, and maturity date as the 12-year bond. How, many zero-coupon bonds would the investor need to purchase to have the same total cash flow, as the 12-year coupon paying bond. (Assume the investor can buy partial bonds.)
Please show your work in excel. I'm stuck on this part. (second part)
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